Student Loans Are Our Biggest Loans

Consumer credit data from the Federal Reserve show a rapid increase in federal education-related debt, implying that more than all of the growth in consumer credit since 2010 has come from student lending. However, these data are distorted by shifts in the source of education credit over the last several years; a more thorough analysis reveals that while debt outstanding in other segments of consumer credit has increased slightly, student borrowing nevertheless probably accounted for more than half of total consumer credit growth through February versus a year ago.

Every now and then, we get these boring reports from Goldman that say something interesting if you can keep your eyes open for long enough. This Goldman report basically says that student loans are becoming the fastest growing component of consumer debt. Take that credit cards! The reasons for the rapid growth include: 1) Tuition getting more expensive, 2) More people enrolling in college because there aren’t a lot of jobs to go around, 3) No jobs means people are poorer, which means they have to borrow more to fund their college educations. What’s the problem? More education debt means people will have less capacity to take on more debt, including mortgages to buy a home, or loans to buy a car, and you need more than a college diploma to get the economy going again.

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