A Disturbing Trend: Part 1

The job report released today is, by all accounts, filled with good news. Look no farther than the FX and equity markets for proof. The dollar is strengthening and the Dow closed at an all time high of 17,068.26. Not only is that an all time high, it marks the first time in history that the Dow has crossed the 17,000 threshold. A strong showing by the U.S. on all accounts.

But let's use this time of happiness to discuss a concern about the U.S. economy. A huge concern. After all, as Bill Walsh, leadership guru and former head coach of the 49ers, wrote, “there is never a better time to do the hard things than when things are going extremely well — both as an individual and as a team.” 

So what's the bullet we'll choose to bite? Student debt. 

Why? Because it's big and only getting larger. 

Figure 1


The growth in student debt over the past 10 years, as shown above in Figure 1, has been remarkable, and that's not a good thing. 

In fact, student debt outstanding in the U.S. now totals in excess of $1 trillion USD, more than either credit card or auto loan debt outstanding.

But what is even more disturbing is that it's growing at an unprecedented pace both in size and prevalence. The number of borrowers of student debt has risen by 70% from 2004 to 2012. In 2010, about 50% of college students financed at least a portion of their education via student debt and according to the latest reports, that number has well surpassed 50%. Simply speaking, more people are paying for college through debt in America than aren't.

Figure 2


At the same time, interest rates on student debt is trending in the wrong direction.

Figure 3, which reflects the CBO's student debt interest rate forecast, paints a grim picture.  

Figure 3



It goes without saying that this growth and these trends suck for student loan borrowers, but what we should also mention is that it impacts almost everyone in the U.S. in a number of ways. 

How so?

We'll discuss that very matter tomorrow.
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