<p>The data source is the NY Federal Reserve Board.</p>
<p>The data doesn't look that bad. The percentages with stratospheric debt is actually quite small.</p>
<p>Almost 90% seem to have loans that total less than $50K, which I think would be manageable once the kids get a job. However, I’m sure that some of the other 10% are in a deep hole…the ones who even bother to pay back their loans. Homeowners aren’t the only ones who sometimes just don’t pay anything on their loans…</p>
<p>Yes, the 10% have problems but if you look at this from the colleges’ perspective, they are generally doing a pretty good job in keeping loan debt manageable. There have been many news articles on how bad the student loan problem is but it doesn’t seem that bad for the vast majority.</p>
<p>It would also be interesting to see the numbers with for-profit schools removed.</p>
<p>I think it looks very realistic. The ones with the lower debt perhaps started their college careers in the early to mid 2000s. I think the kids and parents that come here and talk about $100,000 in debt need to realize it is not necessary and not advised. I still think it’s unfortunate that huge numbers of kids need to take out full federal direct loans and pay them back themselves, but it’s not insurmountable and starting salaries even in the high 20s and low 30s enable kids to do that without considerable hardship. My last year graduate just this month got to the point where he could add the cost of internet (we still pay the cell until the contract runs out.) and his starting salary was one of those in the $20 thousands and he could earn more if he was willing to move somewhere else. Kids have choice. Parents have choice. No one needs to take on debt that is mortgage size.</p>
<p>This couple had debt of almost $70,000.
[Portland</a> couple blogs quest to pay down more than $69,000 in student debt | OregonLive.com](<a href=“http://www.oregonlive.com/living/index.ssf/2012/03/portland_couple_pays_down_more.html]Portland”>Portland couple blogs quest to pay down more than $69,000 in student debt - oregonlive.com)</p>
<p>The devil is in the details. The chart doesnt indicate is this only federal student debt - or did I miss that. What about PLUS or private debt? And yes, I realize that the only way to get to stratospheric federal debt is with grad or proffesioanl school debt.</p>
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<p>The CFPB’s Rohit Chopra, in his comments March 21 to the Austin gathering, noted that the agency’s initial findings on the size of the private student loan debt had been “sobering,” and that when researchers added in the outstanding debt in the federal student loan program, they came up with the figure of $1 trillion. Chopra noted that, unlike other consumer credit products, “student debt keeps growing at a steady clip. Students borrowed $117 billion in just federal student loans last year. … If current trends continue, there will be consequences not just for young people, but for all of us.”</p>
<p>[US</a> student debt surpasses $1 trillion](<a href=“US student debt surpasses $1 trillion - World Socialist Web Site”>US student debt surpasses $1 trillion - World Socialist Web Site)</p>
<p>One thing that the chart doesn’t include: the percentage that has no student loan debt. I’d guess that you could drop all of those percentages if you included those with no debt at all and I’d guess that there are lots of grads in that category - given how I am constantly surprised at how many wealthy families there are in this country.</p>
<p>BC, even some very wealthy people are having their kids take out Stafford loans. Some to have kids to have skin in the game, others thinking their kids may go for forgiveness if they get public sector jobs (which right now for many recent grads are the best jobs around). Upper middle class people like me dont want to waste money on above market rate interest loans.</p>
<p>Our kids have zero loans and my salary wouldn’t be considered upper middle class by any means. I imagine that there are many middle class folks and upper middle class folks like me that eschew debt. There is still the formula of 1/3rd rent, 1/3rd own, 1/3rd have mortgages on their homes. That leaves a lot of room for wealthy and the financially risk-averse with savings to pay for the costs of education without loans.</p>
<p>BC, perhaps I wasnt clear. I know wealthy people that CAN pay for their kids college, but are still having them take out loans – as I said, either for the kids to have skin in the game, or to take advantage of foregiveness programs. </p>
<p>Its the upper middle class people like me who dont want to go that route, as the interest rate is above market.</p>
<p>I’m well aware that people have their kids take out loans even though they don’t need to. Anyone that’s been around here four five years that’s read the financial aid discussions would know that.</p>
<p>I do think that there are a lot of people out there that are risk and loan averse and that have the means and/or the merit or grants so that students graduate with no debt. I’m sure that there are also grads that have had their education paid for by their employers too.</p>
<p>I would hope that most of the debt above $50,000 is for professional degrees. Am I being too optimistic?</p>
<p>The original source of the data is equifax - I don’t know whether or not they have degree data but it would not surprise me if they did as I have filled out various applications for things which ask highest level of education completed. I didn’t see any articles breaking things out by degree though and I don’t think that equifax is going to respond to me for a few database queries - at least not for free.</p>
<p>Of 2010 college seniors - a much smaller group than in the report cited at the start of the thread - one third graduated with no debt. Average debt for those with debt was $25,000.</p>
<p>I live in an upper middle class area, and I am constantly amazed how many people are taking out loans for schools where the COA is $35,000 or less. And loads of families - with parents in their mid-fifties or older - are refinancing into 30 year mortgages or opening HELOCs to cover college costs. Personally I want to retire someday…</p>
<p>Well, that’s good news - by and large, the kids that graduate from college don’t have massive amounts of debt and a good chunk have none. It’s interesting that the number is one-third as that lines up with one-third that own their homes without mortgages. Maybe there’s a lot of overlap.</p>
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<p>Forty years ago that would have been silly (certainly for the banks) but lots of people are living older and better.</p>
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<p>I love working and don’t see myself retiring - maybe cutting back when I’m in my 80s. My mother worked into her early 80s before retiring but she’s still quite active in her 90s.</p>
<p>My husband and I have the goal of having the mortgage paid off by the time we retire in our early 60’s, so a 30 year loan in our mid-50’s wouldn’t work for us. I have also read that about 40 percent of retirees ended up stopping work before they planned, due to either poor health or a layoff or forced retirement.</p>
<p>I think the idea of taking equity out of a home to pay for colllege is a phenomenon of the last 10 years or so. I wonder how many of the underwater mortgages out there are due largely to having done that? That is, even with a fall in value would the mortgage be less than the home value if no equity had been removed to pay college bills?</p>
<p>I paid off the mortgage when I was around 39 or 40. I could have just
held the cash too and kept making mortgage payments but there’s
something to be said about peace of mind.</p>
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<p>If you’re going to do the 30-year mortgage thing at 50, make sure that
you are in excellent health.</p>
<p>Even if you aren’t going to do the 30-year mortgage thing at 50, make
sure that you are in excellent health so that you can enjoy those
retirement years.</p>
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<p>You may not get to keep your current job but you can certainly try
looking for others. They may not pay as much but you can still keep
working.</p>
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<p>I think that a lot of it was for consumption - cars, meals out,
vacations, cruises, etc. Perhaps some of it was for college too. But
why not just go first with student loans over HELOCs?</p>
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<p>I don’t think that the Federal Reserve will be doing a study on that one.</p>
<p>Having $30K in loans is one thing…having $30K in loans and marrying someone with $30K in loans now puts the household up to $60K in loans–a tougher nut to crack, especially if the young couple is thinking of having kids.</p>
<p>BC – I dont see anything in your different links that specifically link your chart with your assertion as to what it includes. There are a number of studies referred to in various links you provide.</p>
<p>Okay, I didn’t post the link to the original article in The Atlantic which created the chart. I can’t find the original article now but that doesn’t matter. The many articles out there over the FRBNY report use data from</p>
<p>[Grading</a> Student Loans - Liberty Street Economics](<a href=“Liberty Street Economics”>Grading Student Loans - Liberty Street Economics)</p>
<p>A lot of the details of the data are at:</p>
<p><a href=“FEDERAL RESERVE BANK of NEW YORK”>http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q32011.pdf</a></p>
<p>The FRBNY Consumer Credit Panel consists of detailed Equifax credit-report data for a unique longitudinal quarterly panel
of individuals and households from 1999 to 2011. The panel is a nationally representative 5% random sample of all
individuals with a social security number and a credit report (usually aged 19 and over). We also sampled all other
individuals living at the same address as the primary sample members, allowing us to track household-level credit and debt
for a random sample of US households. The resulting database includes approximately 40 million individuals in each quarter.
More details regarding the sample design can be found in Lee and van der Klaauw (2010).1 A comprehensive overview of the
specific content of consumer credit reports is provided in Avery, Calem, Canner and Bostic (2003).2
The credit report data in our panel primarily include information on accounts that have been reported by the creditor within 3
months of the date that the credit records were drawn each quarter. Thus, accounts that are not currently reported on are
excluded. Such accounts may be closed accounts with zero balances, dormant or inactive accounts with no balance, or
accounts that when last reported had a positive balance. The latter accounts include accounts that were either subsequently
sold, transferred, or paid off as well as accounts, particularly derogatory accounts, that are still outstanding but on which the
lender has ceased reporting. According to Avery et al (2003), the latter group of noncurrently reporting accounts, with
positive balances when last reported, accounted for approximately 8% of all credit accounts in their sample. For the vast
majority of these accounts, and particularly for mortgage and installment loans, additional analysis suggested they had been
closed (with zero balance) or transferred.
3
All figures shown in the tables and graphs are based on the 5% random sample of individuals. To reduce processing costs, we
drew a 2% random subsample of these individuals, meaning that the results presented here are for a 0.1% random sample of
individuals with credit reports, or approximately 240,000 individuals as of Q4 2009.
Our exclusion of the latter accounts is comparable to some ‘stale account rules’
used by credit reporting companies, which treat noncurrently reporting revolving and nonrevolving accounts with positive
balances as closed and with zero balance.
4
In comparing aggregate measures of household debt presented in this report to those included in the Board of Governor’s
Flow Of Funds (FoF) Accounts, there are several important considerations. First, among the different components included in
the FoF household debt measure (which also includes debt of nonprofit organizations), our measures are directly comparable
to two of its components: home mortgage debt and consumer credit. Total mortgage debt and non-mortgage debt in the third
quarter of 2009 were respectively $9.7 and $2.4 trillion, while the comparable amounts in the FoF for the same quarter were
$10.3 and $2.5 trillion, respectively.
In computing several of these statistics,
account was taken of the joint or individual nature of various loan accounts. For example to minimize biases due to double
counting, in computing individual-level total balances, 50% of the balance associated with each joint account was attributed
to that individual. Per-capita figures are computed by dividing totals for our sample by the total number of people in our
sample, so these figures apply to the population of individuals who have a credit report.
5 Second, a detailed accounting for the remaining differences between the debt measures
from both data sources will require a more detailed breakdown and documentation of the computation of the FoF measures.6</p>
<p>Loan types. In our analysis we distinguish between the following types of accounts: mortgage accounts, home equity
revolving accounts, auto loans, bank card accounts, student loans and other loan accounts. Mortgage accounts include all
mortgage installment loans, including first mortgages and home equity installment loans (HEL), both of which are closed-end
loans. Home Equity Revolving accounts (aka Home Equity Line of Credit or HELOC), unlike home equity installment loans,
are home equity loans with a revolving line of credit where the borrower can choose when and how often to borrow up to the
credit limit. Auto Loans are loans taken out to purchase a car, including Auto Bank loans provided by banking institutions
(banks, credit unions, savings and loan associations), and Auto Finance loans, provided by automobile dealers and
automobile financing companies. Bankcard accounts (or credit card accounts) are revolving accounts for banks, bankcard
companies, national credit card companies, credit unions and savings & loan associations. Student Loans include loans to
finance educational expenses provided by banks, credit unions and other financial institutions as well as federal and state
governments. The Other category includes Consumer Finance (sales financing, personal loans) and Retail (clothing, grocery,
department stores, home furnishings, gas etc) loans.</p>
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<p>The disconnect at [US</a> student debt surpasses $1 trillion](<a href=“US student debt surpasses $1 trillion - World Socialist Web Site”>US student debt surpasses $1 trillion - World Socialist Web Site) was due to my mixing up the CFPB comments with the FRBNY comments and assuming that they are the same. They actually are as the CFPB was using the information from the FRBNY blog post but it would have been more straightforward for me to just reference the blog post and the accompanying paper.</p>