When people ask why the economy is not picking up faster... or why more homes aren't selling, there are two simple answers:
- Unnecessary government intervention in the markets (note the careful use of the word 'unnecessary')
- Overwhelming debt
I won't talk about #1 today... I'll save that for another day :) but I will present some additional information that has just been released by the Federal Reserve Bank of New York regarding student loan debt (which, in this case, really is a big steaming pile of #2).
According to the Quarterly Report on Household Debt and Credit, which has a TON of great information about the debt/credit usage of Americans, the total student loan debt in the US is now greater than the total outstanding debt on credit cards AND auto loans! Yikes!!
The total student loan balance in the US now totals about $870 BILLION ($870,000,000,000) more than the $693 billion of total credit card balance and the total auto loan balance of $730 billion. In addition, almost 10% of all outstanding student loans are in arrears.
Given the current state of the economy, there are more and more people 'going back to school' which means that this balance is expected to increase in the near future.
The average outstanding student loan balance per borrower is more than $23k, and more than a quarter of all student debt holders owe more than $25k. The median amount owed is a slightly more manageable $13k (meaning half owe more than $13k, half owe less).
If someone is already paying a huge percentage of their income on accumulated debt (credit cards, auto loans and now student loans) their chances of financing a home or investing for the future are greatly diminished. This does not bode well for younger Americans... Nor for the overall economy.