Author Topic: This Is What $11.15 Trillion Worth Of Household Debt Looks Like  (Read 11523 times)

SeattleSun

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This Is What $11.15 Trillion Worth Of Household Debt Looks Like

[American Households continue to deleverage thru re-fies, defaults, etc.  Is P2P lending part of that macro deleveraging process since the vast majority of loans are for Debt Consolidation? SeattleSun]

The New York Fed  http://www.newyorkfed.org/regional/householdcredit.html   just published its latest Quarterly Report On Household Debt And Credit.

"In Q2 2013 total household indebtedness fell to $11.15 trillion; 0.7% lower than the previous quarter and 12 percent below the peak of $12.68 trillion in Q3 2008," said the NY Fed in a press release.

"Mortgages, the largest component of household debt, fell $91 billion from the first quarter."

"Total auto loan balances increased $20 billion from the previous quarter, the ninth consecutive quarterly increase and the largest quarter over quarter increase since 2006," they added.

Here are some of the highlights via the NY Fed:

Outstanding student loan debt increased $8 billion to $994 billion.

Credit card balances increased $8 billion to $668 billion.

Total mortgage debt decreased to $7.84 trillion from $7.93 trillion.

HELOC balances fell $12 billion to $540 billion.

Mortgage originations rose to $589 billion, the seventh consecutive quarterly increase.

200,000 individuals had new foreclosure notations added to their credit reports, the first increase since Q1 2012 but still 65 percent below the peak in Q2 2009.

Here's the NY Fed's chart:

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« Last Edit: August 14, 2013, 07:56:13 PM by SeattleSun »

AnilG

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #1 on: August 15, 2013, 03:11:27 AM »
WSJ article on this Fed report

Confident Consumers Step Up Borrowing http://online.wsj.com/article/SB10001424127887323639704579012661218273926.html

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Rob L

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #2 on: August 15, 2013, 08:45:16 AM »
When I mention to my friends and family that there's more outstanding student loan debt than credit card debt in America the response I usually get is something along the lines of "that can't possibly be even remotely correct". Now I see it's about 50% more! There's something very wrong with this picture and I simply hate the idea that our upcoming generations are starting life with this tremendous burden. I know, no one's forcing them to do it; but they're often young, naïve and somewhat clueless when it comes to personal finances and money management. This post has an "on the soapbox", IMHO, moralistic theme, but every time I'm confronted with this fact it really makes me angry. Touches a nerve I suppose.

SeattleSun

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #3 on: August 15, 2013, 09:12:54 AM »
WSJ article on this Fed report

Confident Consumers Step Up Borrowing http://online.wsj.com/article/SB10001424127887323639704579012661218273926.html


Confident Consumers Step Up Their Borrowing
Auto Loans Post Largest Gain in Seven Years, Even as Total Consumer Debt Declines

Huh?  I guess its the UNconfident Consumers who are reducing their Debt?

RollWave

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #4 on: August 15, 2013, 09:25:51 AM »
When I mention to my friends and family that there's more outstanding student loan debt than credit card debt in America the response I usually get is something along the lines of "that can't possibly be even remotely correct". Now I see it's about 50% more! There's something very wrong with this picture and I simply hate the idea that our upcoming generations are starting life with this tremendous burden. I know, no one's forcing them to do it; but they're often young, naïve and somewhat clueless when it comes to personal finances and money management. This post has an "on the soapbox", IMHO, moralistic theme, but every time I'm confronted with this fact it really makes me angry. Touches a nerve I suppose.

despite the large principle difference, the student loan debt is still less burdensome due to the dramatically lower interest rate.

core

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #5 on: August 15, 2013, 09:48:39 AM »
despite the large principle difference, the student loan debt is still less burdensome due to the dramatically lower interest rate.

I don't think I can agree with this.  The staggering amount of principal does make a difference.  Which would you rather have, a $10k debt at 23% or $200k at 6%?  There gets to be a point where it's not even realistic to be able to be paid back in a timely manner.  Folks keep the debt around so long it's a pet.  Student loans cannot be bankrupted.  When things go south there's no negotiation with creditors.  That changes things quite a bit.

The fact that they had out student loans like they are candy just makes the cycle worse.  They don't even factor in ability to repay.  They shouldn't be handing these out, government insured, when your chosen field has ZERO chance of netting you a job where you can pay back the loan.  I hear all the time about social workers being in debt to the tune of several hundred thousand and making $30k/yr.  Someone should have slapped them silly.  Someone should have said no.  Worse yet are young women going into major debt and then deciding to be stay at home moms.  This is insanity.  People do not seem to make logical decisions when it comes to education.  "What core, you don't believe in higher education?"  Nonsense.  And the cycle I speak of is... with loans being so easy to get, there's no reason for universities not to continue raising prices as much as they please.  It never ends.

Rob L

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #6 on: August 15, 2013, 10:04:37 AM »
+1

SeattleSun

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #7 on: August 15, 2013, 12:24:13 PM »
WSJ article on this Fed report

Confident Consumers Step Up Borrowing    http://online.wsj.com/article/SB10001424127887323639704579012661218273926.html


This is the kind of guy I hope I am lending to when I fund 'Debt Consol' on my P2P account.

From the WSJ article:

"Like many Americans, Jason Spangler, 32 years old, took on more debt than he could handle. In 2006, he used credit cards to pay for his wedding, a honeymoon in Alaska and medical bills. As a result, he had $35,000 in credit-card balances on top of two auto loans and a mortgage.

"We thought we'd have more money next month or would find better jobs," said Mr. Spangler, who works in sales in Duluth, Ga. "But that doesn't happen. A silver spoon doesn't fall from the sky."

Mr. Spangler and his wife fell behind on some bills and would pay bills for one credit card with another. That changed when a $1,000 tax bill put the family on the brink of bankruptcy. In 2008, Mr. Spangler used an Atlanta counseling service to negotiate reduced interest rates from lenders and set a budget.

With his finances in order, Mr. Spangler was able to obtain a mortgage to buy a nicer home and to keep his existing home as a rental. He now pays cash for most of his families purchases, including diapers for his four-week-old son.

He no longer worries about racking up debt on credit cards, which became "target practice for my handgun," he said."

« Last Edit: August 15, 2013, 12:33:17 PM by SeattleSun »

SeattleSun

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #8 on: August 15, 2013, 12:26:52 PM »
In case you can't see the WSJ article here is their graphic - FYI.

I love the stories of people having their Social Security checks "garnished" for unpaid student loans. 

And if you have ever had a student loan and paid it off, never, never, ever lose that last statement from Sallie Mae or whoever that says PAID IN FULL.


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« Last Edit: August 15, 2013, 12:31:59 PM by SeattleSun »

Randawl

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #9 on: August 15, 2013, 12:39:54 PM »
I didn't realize student loan delinquency rates were so high.  I wonder if that is percentage balance delinquent in total, including loans in repayment periods, deferment, forbearance, and 6 month grace period or if it is referring to percentage balance delinquent for loans in repayment periods only.  I'm inclined to think it's the latter.

Rob L

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #10 on: August 15, 2013, 12:43:47 PM »
<Large Student Loans == Lifetime Indentured Servitude>

core

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #11 on: August 15, 2013, 12:48:48 PM »
This is the kind of guy I hope I am lending to when I fund 'Debt Consol' on my P2P account.

Yeah, having the triple-C comment in the collection notes, lowering the resale value, and earning 2% interest or whatever was negotiated would be real "fun".

New Jersey Guy

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #12 on: August 15, 2013, 02:04:53 PM »
"<Large Student Loans == Lifetime Indentured Servitude>"

I recently had a client who is currently in the military.
His credit was bad due to "Suspended" Student loans which he was way, way behind on.

Because of the fact he is in the military, the loans, and collection attempts, will remain suspended.

However, I was informed that the minute he leaves the military, they are coming down on him like a ton of bricks.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

SeattleSun

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #13 on: August 15, 2013, 03:26:49 PM »
I didn't realize student loan delinquency rates were so high.  I wonder if that is percentage balance delinquent in total, including loans in repayment periods, deferment, forbearance, and 6 month grace period or if it is referring to percentage balance delinquent for loans in repayment periods only.  I'm inclined to think it's the latter.


Answer is probably in here somewhere:

The New York Fed provides a variety of research about student loans. Below is recent research related to its impact, growth and delinquencies. Additionally, some information provides analysis by age group and geography. Below is the most recent research:

Household Debt and Credit: Student Debt Presentation by Donghoon Lee
http://www.newyorkfed.org/newsevents/mediaadvisory/2013/Lee022813.pdf

Household Debt and Credit: Student Debt Overview by Meta Brown
http://www.newyorkfed.org/regional/Brown_presentation_GWU_2013Q2.pdf

Student Loan Debt by Age Group
http://www.newyorkfed.org/studentloandebt/index.html

Blog: Young Student Loan Borrowers Retreat from Housing and Auto Markets
http://libertystreeteconomics.newyorkfed.org/2013/04/young-student-loan-borrowers-retreat-from-housing-and-auto-markets.html

Blog: Grading Student Loans
http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html


SeattleSun

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Re: This Is What $11.15 Trillion Worth Of Household Debt Looks Like
« Reply #14 on: August 15, 2013, 03:40:31 PM »
<Large Student Loans == Lifetime Indentured Servitude>


Depends: My son-in-law graduated from Pharmacy School in 2008 with $120,000 in student debt.  While others were taking their "signing bonuses" and buying Mercedes he put the $50,000 aganist his student loans.  It took him about 18 months to pay off the other $70,000.  A $120,000 in student debt retired in 18 months.  He recently opened an P2P lending account with his excessive cash flow.

Bottom Line IMO it all depends on what your major and resulting job opportunities are if a student loan is a good choice.   Choose wisely.

====================================================================================================

Only 150 of 3500 U.S. Colleges Are Worth the Investment
Former Secretary of Education Bill Bennett assessed the “return on investment” for the 3500 colleges and universities in the country.
He found that returns were positive for only 150 institutions.

The top 10 schools (note all "private") ranked by Bennett as having the best "ROI" are below for the full list he used click the URL below.

Harvey Mudd College
California Institute of Technology
Massachusetts Institute of Technology (MIT)
Stanford University
Princeton University
Harvard University
Dartmouth College
Duke University
University of Pennsylvania
University of Notre Dame

He found college is “worth it” if you get into a top tier university like Stanford, or study an in-demand field like nuclear engineering at even a lower tier school.

 
Colleges Worth Your Investment - Full List

See the Updated 2013 College ROI List

http://www.payscale.com/college-education-value-2012

« Last Edit: August 15, 2013, 03:43:42 PM by SeattleSun »