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John Lounsbury
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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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  • The Next Bubble Bursting? 8 comments
    Nov 28, 2012 4:06 PM

    It is not as big as the housing bubble, which reached a value of well over $10 trillion, but the student debt total is still significant. It surpassed $1 trillion over a year ago and is now estimated to be about $1.05 trillion.

    The following graph from the 5 Min. Forecast indicates that about $115 billion of the outstanding student debt was delinquent as of the end of September.

    The increase from June 30, when the rate was less than 9%, was about $22 billion. That is an increase of nearly 24% in just three months.

    That seems to be obviously unsustainable, amounting to a 100% compound rate of growth over 10 months. If that rate compounded for 34 months the entire $1.05 trillion now outstanding would be in default.

    Themes: student loans
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    This is all bad enough , and how many of these students will later be saddled with the inherited debt of their parents? It seems reasonable to assume that the students with the highest debt do not have the wealthiest parents.
    A built-in negative for years, perhaps decades to come.
    28 Nov 2012, 07:36 PM Reply Like
  •  
    If you mean personal debts, they are the parents' debts and die with the parents.

    If the decedent has assets, the executor must liquidate the assets and attempt to satisfy creditors before passing along any inheritances. Secured creditors come first, then unsecured.

    But the kids don't have to pay off the parents' debts.
    29 Nov 2012, 12:30 PM Reply Like
  •  
    Truly sad to see this level of student debt and the future problems it will almost surely cause.
    28 Nov 2012, 09:21 PM Reply Like
  •  
    Thank you for the insight John.
    29 Nov 2012, 07:08 AM Reply Like
  •  
    And how much of this student debt was incurred buying worthless credentials or degress from for-profit "schools"?

    That's the truely disturbing part of this whole picture.
    29 Nov 2012, 12:31 PM Reply Like
  •  
    Lamentably, it is even easier to buy worthless degrees from state colleges.

    If ever a very strange world crisis presents itself, our gigantic legions of college graduates with fluff degrees (my personal favorite might be gender studies) stand ready to save the day.

    Until then, we continue importing technically trained people to run our high technology society for us.

    The fact that we have, indeed, paid an enormous price for astronomical numbers of unemployable graduates (not to mention non-graduate professional students), is just the cherry on top of the manure pile.
    29 Nov 2012, 03:51 PM Reply Like
  •  
    GreenRiver:
    Yes, of course you are correct.
    I was referring to the credit card debt that some children have run up to cover their parents medical bills, pay their property taxes, their rent or house payments, help with basic essentials , etc.
    I even know of one case where a child, with their credit card, helped the parent open a new business, and the parent died with that business insolvent, and the child is still paying on it.
    Fortunately some children receive large inheritances and don't have to face anything like this so it is a mixed bag.
    29 Nov 2012, 05:13 PM Reply Like
  •  
    Online accredited learning can't come too soon!

    Dr. K
    30 Nov 2012, 12:46 PM Reply Like
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