Friday, February 10, 2017

$1,400,000,000,000.00 is one hell of a lot of debt = US student debt

The unrelenting upward plod of this graph, showing the level of US student debt, worries me for two reason.

Reason 1. Most of the debt is owned or guaranteed by the federal government. The student loans that the government holds directly on its balance sheet now represent almost 30% of the total consumer debt. That is one hell of a lot of money that we all know will not be repaid in full. Think of like sub-prime housing debt. These are the loans provided to people, many of whom will never be able to pay them back. First reason to be a bit worried.

Reason 2. Those young people (and some older souls) who are trying to pay repay this debt will not be spending it on products and services. Get the picture? This is one hell of a large drain that will slow consumer expenditure. Those of you besotted by Millennials might want to ponder on this point for a while.

Other than that, we can be totally relaxed! Dick Stroud

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