The Wall Street Journal picked its top ten economic charts of 2012, including one published in November showing that outstanding student loan debt now “outpaces all other nonhousing consumer debt”. (Bear in mind the chart does not include unreported student loan “shadow debt” that could increase these figures by one-third or more.)
U.S. student-loan debt rose by $42 billion, or 4.6%, to $956 billion in the third quarter, the Federal Reserve Bank of New York said Tuesday. Overall household borrowing fell during that period.
Payments on 11% of student-loan balances were 90 or more days behind at the end of September, up from 8.9% at the end of June, a rate that now exceeds that for credit cards. Delinquency rates for all other consumer-debt categories fell or were flat.
Nearly all student loans—93% of them last year—are made directly by the government, which asks little or nothing about borrowers’ ability to repay, or about what sort of education they intend to pursue.
President Barack Obama championed easy-to-get loans during the campaign, calling higher education “an economic imperative in the 21st century.” A spokesman for Education Secretary Arne Duncan said the goal is “to make student loans available to as many people as possible,” and requiring minimum credit scores would block many Americans from going to college….
… the government demands no collateral and has no underwriting requirements….
… “The way the system works now…put money on the stump, people come and get it,” said Anthony Carnevale, director of Georgetown University’s Center on Education and the Workforce. “Can’t blame them. It’s sitting out there in plain view. It’s easy to get.”
Jackson Toby, a retired Rutgers professor and adjunct scholar at the American Enterprise Institute, recommends reforms that would make student loan lending standards similar to those of other consumer debt. This change would exclude many lower-income students.
He proposes that students undergo a comprehensive assessment of credit-worthiness, including how much debt they currently have, their academic history and their expected income upon graduation, given their major, before getting federal student loans.
Imposing tougher standards would exclude some potential borrowers. “You would have loans only going to upper-income students at the best colleges,” said Mark Kantrowitz, who publishes Finaid.org, a student-aid website.
Other charts among the WSJ’s top picks cover the changes in categories of consumer spending over the last century, how unemployment benefits differ among the different states, and how deficit spending has become the norm in recent years.
Related: Did the student loan bubble just burst? (costofcollege.wordpress.com)