The N Y Federal Reserve released the information in the chart below this week.
Two takeaways:
- 1. Overall consumer debt is rising, but still below record highs set in 2008. Presumably this is a good sign as consumers theoretically only borrow when they feel confident about the future. Wall Street analysts apparently don’t understand the concept of borrowing because there is no other money available to buy stuff…like food.
- 2. Student loan debt is at absurd and unsustainable levels. Trouble is most recent college grads don’t have a lot of money to invest, so Wall Street likes to ignore this stat too.
But if you look at the numbers, student loan debt is 125% of all auto loan debt. Considering that most Americans own a car, and only 33% of Americans age 25 to 29 have a college degree the debt per college grad is crippling, considering that cars and thus car loans, aren’t cheap.
What to watch for:
Before we talk bailouts and defaults watch for Wall Street to start bundling and selling pools of student loans to investors. The Government will say what a good idea this is, and investors will feel patriotic as their investments will help fuel more lending and more debt to unsuspecting future college grads. Then wait for the defaults and the billions of dollars retirees will lose out of their retirement accounts. Won’t happen? Just substitute “mortgage” for “student loan”. History really does repeat. (And just as a warning – student loans are already being bundled for secondary market, )
Are you just starting out? Saddled with debt? Trying to save, pay off debt and live a little all at the same time? If you need help, give me a call and we can get you started with a lifetime financial plan.
