Home > Uncategorized > Chasing the American Dream into a deadend

Chasing the American Dream into a deadend

from David Ruccio

debt

The latest Quarterly Report on Household Debt and Credit (pdf) from the New York Fed’s Center for Microeconomic Data showed a substantial increase in aggregate household debt balances in the fourth quarter of 2016 and for the year as a whole. As of 31 December 2016, total household debt stood at $12.58 trillion, an increase of $226 billion (or 1.8 percent) from the third quarter of 2016. Total household debt is now just 0.8 percent ($99 billion) below its third quarter 2008 peak of $12.68 trillion, and 12.8 percent above the second quarter 2013 trough.  

That means the debt loads of Americans will likely surpass the previous peak later this year.

Part of the problem is that U.S. workers, whose real wages continue to stagnate, are forced to have the freedom to take on more debt in order to maintain their customary standard of living, for themselves and their families.

delinquent

The other part of the problem is that, while loan delinquency rates are generally declining, the rate for student loans (11.2 percent)—the one form of consumer debt that can’t be erased—is higher than for any other form of consumer debt. Outstanding student loan balances increased by $31 billion, and stood at $1.31 trillion as of 31 December 2016.

And, as Derek Thompson explains, the student-debt crisis is most acute not for the much-cited $100,000-debt stories, but for students whose debt burdens are much smaller, many of whom took on a few thousand dollars in debt and didn’t even get a degree.

This is particularly tragic, because these debt-without-degree adults chased the American dream into a dead end.

  1. Susan Feiner
    February 19, 2017 at 7:15 pm

    Of the $1.5T student debt, Dept of Ed will not release data showing actual amounts borrowed v. Amounts owed. Most estimates are that 50% of the $1.5T = fees, late charges, penalties, all added to principle & compunded. All perfectly legally. Very simple fix: change one sense in Ch11-subsection 8 so student loans can be discharged in bankruptcy.

  2. February 19, 2017 at 9:37 pm

    A brief look around indicates enrollment in college after high school peaked in 2009. I believe that is about the time when bankruptcy for student loans was forbidden and loan sharks like Betsy DeVos and her family got into the student loan shark business.

  3. February 19, 2017 at 11:52 pm

    Student loans that cannot be discharged through bankruptcy have been designed as a gift to the finance industry –allowing them, in practice, to forgo any responsibility for due diligence as lenders — and to effectively create a lifelong serfdom to that industry for many who thought they were making an investment that could pay for itself over time. I agree with Susan Feiner that the ‘miracle’ of compound interest probably account for more than half the ‘debt’.

  4. February 20, 2017 at 12:45 pm

    Student loan indebtedness is a national crisis. One in a long line arising from serving the needs of the financial industry over those of either students or the nation. Two of my sons are involved in this crisis. The third son decided not to attend college because it requires taking on such debt. The oldest and his girlfriend came up with a solution. Both ended college with over $10,000 in debt. Neither has full time employment. Their total income last year was about $25,000. Mostly from part-time and periodic jobs. Their solution, they simply refused to repay the loans. They were of course threatened with collection actions. Their response: we have no money, we own no real property, and we have no permanent job. To collectors: take your best shot! On top of that all their employers for last few years have made it clear they will not cooperate with student debt collections. This works I believe because they live in Oregon. Don’t know how successful it would or could be elsewhere in the US. So apart from changing policies we also need to change laws regarding involuntary debt collection. I talk with my son and his friends about this. It’s their view the current arrangements on student debt are not just one-sided, they are one-sided to such an extent they threaten the welfare and future of the nation. It’s a simply choice. We can have good times for financial actors who want to lend to students. Or, we can have a prosperous, peaceful, and forward looking nation. We cannot have both.

    • robert locke
      February 20, 2017 at 5:32 pm

      I solved the problem easily. My kids went to the university and got degrees in Germany. The costs were minimal. So I let the German nation subsidize my children’s higher education, which, if people can pass entry exams, is relatively easy to do, since Germany reserves 10% of the places in higher education for foreigners.

      • February 21, 2017 at 5:50 am

        Good plan. Wish I had that option with my kids.

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