The Student Loan Debt Bomb

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Last week, the Federal Reserve Bank of New York reported that student loan debt increased to $956 billion, more than auto loan debt or credit card debt. More worrisome, the student loan 90-day delinquency rate increased to 11% this past quarter and for the first time exceeds the "serious delinquency" rate for credit card debt.

Student loan debt is reaching bubble-bursting levels. By comparison, in October 2007, the start of the subprime mortgage crisis, 16% of subprime mortgages were 90 days delinquent, according to Federal Reserve Chairman Ben Bernanke. By January 2008 it accelerated to 21%. If the economy heads off the fast-approaching fiscal cliff and tax rates spike for lower- and middle-class Americans, it may accelerate student loan defaults to crisis levels. The big banks got their taxpayer bailout; taxpayers may soon be on the hook for another.

Even if the markets manage to avoid another debt crisis, the mountain of student loan debt is already taking its toll on a weak economy.
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