Blame IQ Tests for the Student Debt Problem
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Everyone is worried about debt. Government debt, household debt, personal debt, corporate debt. We are in it up to our eyeballs and often beyond.
Student debt should be productive—after all, it buys education that enhances your income. Yet for millions of Americans, that’s not what has happened, and the reason may surprise you.
The New York Federal Reserve Bank publishes an always-interesting Quarterly Report on Household Debt and Credit. The Q4 2017 version came out last week.
Collectively, Americans carried $13.15 trillion in debt as of year-end 2017.
As you can see, most of it is mortgage debt—about 71% of the total if you include home equity loans.
Surprisingly, the next-largest category isn’t auto loans or credit cards. It’s student loans, which are now 10% of total debt. Their share has been growing steadily.
Wall Street Journal‘s higher-education reporter Josh Mitchell had an interesting story on this last week. Using the same New York Fed data, WSJ showed this info on loan delinquencies:
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