Tuesday, December 31, 2013

One of these things is not like the other ...

This is the time when everyone is making financial and economic forecasts for the upcoming year and beyond. Here is a simple forecast from Sober Look that did not require much analysis. By the end of 2014, student loan balances held by the federal government will exceed $850 billion and by the end of 2015 the number will be above a trillion. And this is on top of some half a trillion of loans that are not directly held but guaranteed by the federal government.
Source: FRB

So what? We've gotten numerous e-mails asking this question. The problem of course is government-subsidized and rising consumer debt burden - all on the back of the taxpayer. When the government is involved on such a large scale, there are usually unintended consequences and market distortions (elevated tuition costs for example). But it's the borrowers who are stretched to the limit due to outsize student loans and limited employment opportunities that is the growing problem - both for the borrowers and the taxpayers.

Remember the old song from Sesame Street: "One of these things is not like the other..."? The chart below from Wells Fargo shows the one thing that is definitely not like the other.

Source: Well Fargo

Happy New Year!

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