Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
Stock Market SPX New All-time Highs Continue - 25th Feb 17
POWERFUL GOLD & SILVER COILED SPRINGS: Important Charts You Have To See - 25th Feb 17
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Why the Ballooning Student Debt Should Be on Your Radar

InvestorEducation / US Debt Dec 12, 2012 - 10:53 AM GMT

By: InvestmentContrarian

InvestorEducation

John Paul writes: We’re two weeks away from surviving the Mayan Doomsday and three weeks away from stepping over the fiscal cliff. But the unabated student loan debt is just getting warmed up. Instead of dealing with the problem, Washington’s policies continue to stoke the fire. And that economic strain spells continued misery for America’s ongoing credit crisis woes.


Outstanding student loan debt has surged 165% in just seven years, from $360 billion to $956 billion. Furthermore, the average loan balance for U.S. college students has increased more than 68% since 2005 to $27,000. (Source: “Student Loan Debt History,” Federal Reserve Bank of New York web site, last accessed December 11, 2012.)

On a more granular level, student loan debt jumped $42.0 billion, or 4.6%, over the previous quarter to $956 billion. During the same period, car loan balances increased for the sixth consecutive quarter to $768 billion. U.S. credit card debt held firm at approximately $601 billion.

Eleven percent of all student loan balances are 90 or more days delinquent, surpassing all other forms of debt. Credit cards, car loans, and mortgages are all in better shape than student loans, with 90-day delinquency rates of 10.0%, 4.3%, and 5.9%, respectively.

According to the Federal Reserve, student loan debt is the only form of consumer debt that has grown since the peak of consumer debt in 2008, and it is the largest form of consumer debt outside of mortgages. What’s more is that unlike credit card debt, student debt is not forgivable in bankruptcy.

And that is creating a nightmare scenario for graduates young and old. In fact, every age group is experiencing higher rates of student loan delinquencies. Student loan debt for those 60 and older has increased the most, up 337% since the beginning of 2005. For those 30–49 years old, college debt is up 156% since the beginning of 2005 at an eye-watering $461 billion.

Those in their 50s and 60s should be looking forward to shoring up their investments and preparing for retirement…not stressing about student loans, having their Social Security garnished, and moving back in with their kids. Not that their kids have it that much better.

Because student loans cannot be written off through bankruptcy, those in their 20s, 30s, and 40s who are buried by debt cannot afford to buy cars, mortgage a house, invest in the markets, or begin to save for retirement. And chances are, those who are forced to move back in with their parents to make ends meet will postpone getting married and having children. Students who default or struggle to pay their loans also can’t afford to buy their own cars or do much of anything else for the U.S. economy.

Let’s not forget those statistically invisible parents who decided to take out loans or re-mortgage their houses to pay for their kid’s education. The Great Recession saw many financially stable people lose their jobs and have to tap into their savings and retirement funds to get by, while others have had to declare bankruptcy.

Not surprisingly, with the U.S. economy growing at a snail’s pace, those with student loan debt are finding it difficult to land “good jobs.” University degrees that used to hold the promise of higher-paying jobs don’t anymore.

Fourteen percent of America’s waiters and waitresses have bachelor’s degrees. More than 16% of bartenders and five percent of janitors have bachelor’s degrees. In fact, half of adults with bachelor’s degrees have jobs that require less education. (Source: “Janitors, clerks and waiters with college degrees,” CBS MoneyWatch, November 5, 2012, last accessed December 11, 2012.)

If I had to pay $100,000 for a degree and was told there was a 50/50 chance I wouldn’t land a good job, would be laden with debt, and living with my parents…I wouldn’t take the risk. Whether it applies to a student loan or walking down the aisle, everyone thinks they’ll buck the odds. And why not? Few set out thinking they’ll fall short.

Just as homeowners walked away from mortgages that outstripped the shrinking value of their properties (and helped fuel the 2008 credit crisis), a similar recipe of easy money and the scarcity of high-paying jobs means a large number of post-secondary school graduates are going to default on their student loans.

At the current rate, American student loan debt will surpass combined credit card and car loan balances within five years. With incomes stagnating, the student debt loan bubble will either stretch itself thin or pop. (Source: “U.S. student debt on scary trajectory,” Reuters, July 18, 2012, last accessed December 11, 2012.)

The U.S. Department of Education holds a $352-billion portfolio of student loan receivables—something unemployed and underemployed students won’t be able to repay. (Source: “Federal Lending Programs,” Center on Federal Financial Institutions web site, last accessed December 11, 2012.)

But the government may have to. Even though they don’t have the money to pay for it, they can always ask the Federal Reserve to print more. After all, you have to print money to make money.

Thanks to three rounds of quantitative easing (QE), the Federal Reserve has already printed off around $3.0 trillion. The national debt already stands at over $16.0 trillion. What’s another trillion?

Besides, what’s the worst thing that can happen? Your dollar gets devalued and international confidence in the U.S. economy and greenback evaporates? Discretionary income disappears along with a U.S. economy backed by consumer spending?

With interest rates expected to hover around zero for the near future, investors looking to get the most out of their portfolios may need to consider hard assets that will weather a devalued U.S. dollar; like gold and silver. You may also want to consider stocks that tend to be “recession-proof” or are considered necessities, such as “death care,” health care, and energy.

With the U.S. economy starting to show signs of sustained life, you may want to even consider companies in the packaging and containers industry.

The point is: it’s not easy to find companies to invest in this climate. Investors have to be picky and look for those companies that perform consistently well, signal an upswing, or, like gold, go against the prevailing wind.

Source:http://www.investmentcontrarians.com/debt-crisis/why-the-ballooning-student-debt-should-be-on-your-radar/1122/

By John Paul Whitefoot, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: John Whitefoot, BA, is an Editor at Lombardi Financial specializing in penny stocks. Prior to joining Lombardi, John worked for eight years as the Senior Financial Editor of a leading online financial newsletter. Through his career, John has profiled over 1,000 penny stocks researching and covering numerous sectors including healthcare, media, manufacturing, IT, education, hospitality, natural resources, and retail. He's primarily a fundamental analyst who focuses on "off radar" penny stock situations with big upside potential for the individual investor. Read John’s Article Archives

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife