Best of the Week
Most Popular
1.U.S. Inner City Turmoil and Other Crises: Ron Pauls Predictions for 2015 - Dr_Ron_Paul
2. What’s In Store For Gold Price in 2015? - Ben Kramer-Miller
3.Crude Oil Price Ten Year Forecast to 2025: Importers Set to Receive a $600 Billion Refund - Andrew_Butter
4.Je ne suis pas Charlie - I am not Charlie - Nadeem_Walayat
5.The New Normal for Oil? - Marin_Katusa
6.Will Collapse in Oil Price Cause a Stock Market Crash? - OilPrice.com
7.UK CPI Inflation Smoke and Mirrors Deflation Warning, Inflation Mega-trend is Exponential - Nadeem_Walayat
8.Winter Storms Snow and Wind Tree Damage Dangers, DIY Pruning - Nadeem_Walayat
9.Oil Price Crash and SNP Independent Scotland Economic Collapse Bankruptcy - Nadeem_Walayat
10.U.S. Housing Market Bubble 2.0 Meet the Pin - James_Quinn
Last 5 days
Kaminak Yukon Gold - 30th Jan 15
U.S. Asset Price Deflation Coming Up? Food Prices Drop? CPI Negative? Credit Deflation? - 30th Jan 15
An Often Overlooked Predator: State Governments and Income Taxes - 30th Jan 15
Bullard Says Rates at Zero Interest Rates Not Right for U.S. Economy - 30th Jan 15
Why the European Central Bank's Massive Economic Experiment Will Fail - 30th Jan 15
Gold Price Short-Term Bottom Due, Higher into February - 30th Jan 15
Silver and Other Precious Metals To Manipulate - 30th Jan 15
Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There - 30th Jan 15
To Create Unlimited Market Liquidity or Not; That Is the Question - 30th Jan 15
Seen the Energy Downturn Movie Before, and Not Worried - 30th Jan 15
It’s Not Time to Sell Everything – Yet - 30th Jan 15
13 Investment Themes for 2015 - 29th Jan 15
The Raging Currency Wars Across Europe - 29th Jan 15
The End of Currency 'Safe-Havens' - 29th Jan 15
Ron Paul on U.S. Fed, Central Bankers Monetary Psychopaths - 29th Jan 15
Why Microsoft Stock Will Provide Major Investing Returns - 29th Jan 15
Exploring the Clash Within Civilizations - Mind the Gap - 29th Jan 15
Saudi Arabia Changes Kings, But Not its Oil Policy - 29th Jan 15
Crude Oil Price Bulls vs. Resistance Zone - 28th Jan 15
Acceleration Of Events With Rising Chaos – US Dollar Death Foretold - 28th Jan 15
The Fed and ECB Take the West back to when the Rich Owned Everything - 28th Jan 15
Washington's War on Russia - 28th Jan 15
Cyber War Poses Risks To Banks and Deposits - 28th Jan 15
Lies And Deception In Ukraine's Energy Sector - 28th Jan 15
EUR, AUD, GBP USD – Invalidation of Breakdown - 28th Jan 15
“Backup-Camera Envy” Is Driving This Unstoppaple Investment Trend - 28th Jan 15
The Great "inflated" Expectations for Gold, Oil, Commodities -- and Now Stocks - 28th Jan 15
How to Find the Best Offshore Banks - 28th Jan 15
There’s More to the Gold Price Rally Than European Market Fears - 28th Jan 15
Bitcoin Price Tense Days Ahead - 27th Jan 15
The Most Overlooked “Buy” Signal in the Stock Market - 27th Jan 15
Gold's Time Has Come - 27th Jan 15
France America And Religious Terror War - 27th Jan 15
The New Drivers of Europe's Geopolitics - 27th Jan 15
Gold And Silver - Around The FX World In Charts - 27th Jan 15
It’s Not The Greeks Who Failed, It’s The EU - 27th Jan 15
Gold and Silver Stocks Investing Basics - 27th Jan 15
Stock Market Test of Strength - 26th Jan 15
Is the Gold Price Rally Over? - 26th Jan 15
ECB QE Action - Canary’s Alive & Well - 26th Jan 15
Possible Stock Market Pop-n-drop in Store For SPX - 26th Jan 15
Risk of New Debt Crisis After Syriza Victory In Greece - 26th Jan 15
How Eurozone QE Works: A Guide to Draghi's News - 26th Jan 15
Comprehensive Silver Price Chart Analysis - 26th Jan 15
Stock Market More Retracement Expected - 26th Jan 15
Decoding the Gold COTs: Myth vs Reality - 26th Jan 15
Greece Votes for Syriza Hyperinflation - Threatening Euro-zone Collapse or Perpetual Free Lunch - 26th Jan 15
Draghi's "No-growth" QE Money for Stocks, Zilch for the Economy - 25th Jan 15
Unjust and Undeclared Wars - 25th Jan 15
The European Central Bank Commits Monetary Suicide - 25th Jan 15
Stock Market ECB EQE week - 25th Jan 15
Gold And Silver Timing Is Most Important Element - 25th Jan 15
The Best Way to Invest in the Next Alibaba Internet Stock IPO - 25th Jan 15
The Outpatient Surgery Business Rains Cash into Healthcare Stocks - 25th Jan 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Learn to Trade

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

© 2005-2014 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

Free Report - Financial Markets 2014