Archive for the ‘Debt’ category

The Best of Times, The Worst of Times

February 16, 2018
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”
– Charles Dickens, A Tale of Two Cities

The U.S. economy is currently in the third longest period of uninterrupted expansion in its history, soon to be the second longest, and there is a better than even chance it will become the longest in history 16 months from now.  Even without the recently enacted deficit-financed stimulus (tax cuts and expenditure increases) the U.S. economy was on solid ground, with growth forecast to be stronger in 2018 than it was in 2017. That is what makes lack of concern over the projected increase in the government’s annual deficit from about $700 billion to $1 trillion especially troubling.


The current economic expansion is exceptional in duration and atypical in gaining strength late in the economic cycle.  But it is also about to become notorious for producing a burgeoning federal deficit during a period of solid economic growth (annual federal deficits are generally inversely related to economic conditions).  So the price of  stronger growth and a longer expansion is looking like higher annual budget deficits (forecast to grow from 3% of GDP to 5% just by 2019) and a national debt that will grow from about 76% of GDP to 97% over 10 years, risking longer-term economic growth.  It is a high price to pay for a small increase in economic growth and a fiscal policy gamble to add stimulus to an economy near full employment but it is  price that the administration and congress are willing to pay without hesitation.

Annual deficits declined between 2012 and 2016 as the economic recovery strengthened and costs associated with the “stimulus” eroded.  But since early 2016 deficits have been increasing.  The difference between monthly revenues and expenditures over the most recent 12 twelve months (between February 2017 and January 2018) shows that the annualized federal deficit stands at $682 billion compared to $585 billion for the February 2016 to January 2017 time period, a 17% increase over the year and up from a low of $405 billion early in 2016.


The increase in the deficit results from both higher spending and a slowing rate of revenue growth (chart below), and it comes before the impacts of recently enacted tax cuts and the two-year spending agreement take effect that will both lower revenues by about $1 trillion over the next decade (even after accounting for growth effects) and increase spending by about $300 billion just over the next two years.

Spending and revenues

The U.S. has had higher annual deficits in the past, but always during a period of weak or negative economic growth.  Increasing deficits and greatly adding to the nation’s debt in the absence of an economic downturn should have been a giant caution sign for lawmakers.  If  $400 billion annual deficits were “crippling” our economy in 2016 (as some lawmakers suggested) how are $1 trillion deficits in a growing economy not of more concern?  Debt is often the match that lights the fire of economic crisis, whether the fault was with politicians, central bankers, overzealous consumers, businesses, developers, bankers, credit rating agencies, regulators, or any combination thereof, all true crises involve too much leverage.

With that admonition (screed?), reducing the corporate tax rate was still a good idea, the U.S. rate was too high. And yes, a lower corporate tax will raise wages eventually (lower taxes increase capital investment and improve productivity – raising wages), but only after years, and certainly not in the time frame suggested by the White House. But just as important (and largely a missed opportunity in the legislation) was the need to eliminate targeted and industry-specific preferences that direct too much investment to tax-favored activities rather than to their most productive uses.  Many of the agreed upon expenditure increases also have merit.  Overall, however, the combination of tax and spending policies recently enacted seems poorly structured and ill-timed.  If we enact a deficit funded stimulus when we are near full employment and when the economy is already poised to grow more rapidly, what will we be able to do when the next recession arrives?

Impact on State Finances

The New Hampshire economy is fundamentally strong, our industries are as vibrant and innovative as ever and the state’s economy would be growing and producing more if the supply of labor could accommodate more growth. It can’t, labor force growth is not keeping pace with labor demand and economic growth has been slowing in New Hampshire for at least two quarters. It will continue to do so in 2018. So too will state revenues.

Job and LF Growth

State-level GDP estimates produced by the U.S. Bureau of Economic Analysis are reported with a long lag and are not a very timely indicator of current state growth trends.  A useful proxy for assessing growth trends in state-level GDP is aggregate hours worked in the state (employment times the average number of hours worked) which correlates well with changes in the state’s total output of goods and services (GDP).  Adding current estimates of U.S. productivity growth (there is no similar state-level measure) provides a high-frequency estimate of the state’s GDP growth trend.  As the chart below shows, the growth rate of NH GDP is declining, again, primarily because the rate of employment growth is declining.  When you are adding fewer workers the output of the state’s economy will grow more slowly unless there is a significant increase in productivity (it has increased some but not significantly).

Aggregate Hours Worked

Slower employment and economic growth in NH (along with changes in revenue policies) have slowed the rate of revenue growth in the state since 2016.  There has been a bump in the past few months but how the recently enacted tax cuts at the national level will affect the trend is uncertain.  What is certain is that the growth constraints NH faces will make it difficult to accelerate economic growth in the state and thus state revenues.

Looking at annualized revenue growth (summing any 12 month period), the chart below shows that revenue from NH’s nine largest sources of general revenue (and the sources most affected by economic trends) hit a plateau in 2016, at a time when employment growth was at its post-recession peak.  Since that time, annualized growth in the revenue sources most affected by economic conditions has slowed.


 Looking at the rate of change in annualized state revenues illustrates the longer-term slowing of the rate of annualized growth.   The chart below shows how significantly the growth rate in revenues has slowed since 2016.

Revenue Growth Rate

Expenditure Pressures Will Mount

The impact on state revenues of recent changes in federal policies may be uncertain but their impact on state and local government is likely to add to the state’s fiscal pressures.  A great deal of uncertainty exists over how funding for state-operated programs that share costs with the federal government will be affected but most signs point to less funding for programs like Medicaid and infrastructure.  The administration’s recently announced $1.5 trillion infrastructure proposal actually reduces funding for states while calling for greater state commitments.  Proposals to cap or block-grant Medicaid funding would significantly add to the fiscal pressures facing all states.  At the same time mandatory spending on things such as government pensions are poised to increase significantly in coming years.

Other recent federal policies will affect states and localities by increasing the cost of borrowing.  One change eliminated the tax-free status of “advance refunding bonds” that allow states and communities to refinance debt at lower interest rates well before their call date in order to free-up funds for other purposes.  The prospect of annual deficits of more than a trillion dollars (placing greater demands on credit markets) during a strong economy when deficits typically fall, has also increased expectations of higher interest rates, increasing the cost of borrowing by governments, households and businesses.  How fast and how much rates rise is not certain but they have already increased significantly this year (albeit from low levels.)

Less directly, federal tax law changes will affect the borrowing costs of state and local governments by making municipal bonds less attractive (relative to other loans and investments).  Banks and insurance companies are big buyers of municipal bonds – lending money to state and local governments.  The interest rate that governments have to pay on those bonds is lower than on other types of loans made by banks because banks and insurance companies do not have to pay taxes on the income they earn from loans to governments.   The drop in the corporate tax rate reduces some of the advantage of the tax- free bonds and makes other loans/investments made by banks and insurers more attractive relative to municipal bonds.  Interest rates on municipal bonds will have to rise to remain competitive with other loans.

Along with slower growth in state revenues there are enough spending pressures building along with potential impacts from recently enacted federal policies to suggest  lawmakers in the state would be wise to be cautious in the next budget cycle that begins in the fall of this year.

The divergence between economic and fiscal conditions doesn’t seem to be troubling to many policymakers at the federal or state level.  With apologies to Dickens, it does feel like “it was the best of times, it was the worst of times.” Let’s hope that it isn’t also becoming “the age of foolishness.”


Mismeasuring the Burden of Student Loan Debt

October 14, 2015

Rising higher education costs along with the volume of outstanding student loans, now in excess of $1.3 trillion nationally and greater than the volume of credit card or motor vehicle loan debt, are prompting  concerns about the impact that student loan debt is having on economic growth. Student loan debt grew at the fastest rates on record during the 2000s, doubling from $600 billion to $1.3 trillion over the past decade. Popular reports annually rank the debt loads of students graduating from colleges and universities in each of the 50 states. New Hampshire, is notable for being at the top of the list as having students graduate with the highest levels of debt in the nation.

debt of grad 2013

But the average debt levels of recent college graduates in any state says little about the impact that student loan debt has on a state’s economy. First, the schools from which students graduate aren’t necessarily the states in which students choose to reside (and repay their debts) after graduation, and second,  reports of the average debt levels of recent graduates provide no information about the outstanding balance of student loan debt (and thus overall student loan debt burden) held by residents of each state. The latter is necessary to understand the impact that student loan debt is having on a state’s economy.  I had not seen data on the balance of student loan debt on a state-by-state basis until a journalist (Ryan Lessard of the Hippo Press here in New Hampshire) passed along data from the U.S. Department of Education that was recently released by the White House. The data includes information on federal student loan debt only, and does not include private student loans or other loans used to pay for college – such as home equity loans taken out by parents, but is still extremely useful in understanding the differential impact of student loan debt in each state. The data present a different view of the student loan debt issue than do the data released annually on the debt of recent college graduates. In this post I add some economic and demographic data to the student loan debt data from the Dept. of Education to examine different measures of the relative burden that student loan debt places on individuals, and thus the economy of each state.

As of January of 2015 there were 212,000 individuals residing in New Hampshire with outstanding federal student loan debts totaling $5.1 billion dollars according to the U.S. Department of Education. The $5.1 billion compares to my estimate of $4.5 to $5.6 billion in credit card debt and $37.8 billion in home mortgage debt in the state.  In contrast to reports showing that the most recent graduates of colleges in NH have the highest student debt levels, the average outstanding loan balance among all of NH’s borrowers (regardless of where or when they graduated), at $24,048, was near the bottom of all states.

outstanding balnace by state

As I documented in a recent study of student debt, New England and the Northeast have the highest college costs in the nation, with graduating student’s debt levels similarly high. So why would NH’s average outstanding student debt balances be among the lowest in the nation? If NH residents with student debt had been paying off those debts for a longer period of time (that is borrowers were longer removed from college i.e. older on average) then their debt levels would be relatively lower even if their original debt levels were higher on average. In addition, if recent grads in NH, and their higher debt levels, leave the state, while somewhat older individuals move into the state, the state would be trading individuals with higher debt levels for those with more modest student debt levels. This seems like a plausible explanation based on some of the analysis of NH’s demographic trends I’ve written about in this blog and elsewhere. In addition, some of the discrepancy results from the new data on total student loan balances by state that includes all debt from students at two and four year colleges, as well as graduates and those with debt but who did not graduate. Thus the data released by the White House is a much more comprehensive measure of student loan debt at the state level. In addition, because it aggregates student loan debt of individuals who reside in each state, it is a more appropriate measure of the burden of student debt on any state’s economy.

Student loan debt is a problem, it has retarded household formation in NH and the U.S. and contributed to a slower than anticipated recovery in the housing market.  It has other negative impacts on younger individuals and families as well, but how large of a burden is student debt on any state’s economy and what is the best metric to assess it? It is not an easy question to answer.  The White House (Dept. of Education) data helps tremendously but analyzing it raises almost as many questions as it answers. The $5.1 billion in federal student loan debt held by borrowers living in NH represents about 7.1 percent of the state’s 2014 gross state product. Using this measure , NH ranks in the middle of all states on student loan debt burden, higher than indicated by the average student loan debt in the state. Because NH has a high percentage of students who have attended (and graduated) from college, even with below average student debt levels among all borrowers, the aggregate debt as a percentage of the state’s economy is higher than in states with lower average levels of debt among borrowers.  States with a high percentage of college attendees and graduates in their populations are likely to have a higher student loan debt to GSP ratio regardless of the average outstanding loan balance of borrowers. But is 7.1 percent a problem for the state’s economy?

debt as a pct of gspI think the student loan debt burden is probably better understood from its impact on individuals.   Only about 20 Percent of the adult population (age 18+) in New Hampshire have student loan debt and the debt has its greatest impact on a subset of the adult population. The typical repayment period of student loan debt is 10 years so, in theory, the population between graduation (or leaving school) and the age of about 35 should be most affected by student loan debt and assessing the impact of student loan debt should focus on impacts among this demographic group. For this analysis I use the characteristics of each state’s population ages 24-34 to assess the relative impacts of student debt on each state. The chart below uses the average outstanding student loan debt in each state and the average annual earnings of residents age 24-34 in each state to calculate how much of the annual earnings of 24-34 year working individuals with at least an associate’s degree go to student loan repayment in each state. Using the average outstanding loan balance in each state and assuming a combined federal subsidized and unsubsidized loan  interest rate of 4.5 percent, on a monthly basis, almost all states have average student loan burdens that require monthly payments of less than $300. The one exception is DC, not presented on the graph, where the $40,000+ average loan balance and $413 monthly payment is attributable to the high percentage of law school and other professional and advanced degree student who reside in the city.

monthly paymentA monthly student loan payment of $300 is not an inconsequential amount but less than most new car loan payments. Still, as a percentage of annual earnings, student debt payments clearly could influence the ability of younger people to purchase a home or make other significant financial commitments.  Combining monthly payments (annualized)  with the average annual earnings of college graduates ages 24-34 living in each state provides a measure of student loan debt service as a percentage of the earnings of graduates in each state.  Again, the chart shows that New Hampshire, along with several other states with both high college costs and high debt, rank relatively lower on repayment as a percentage of annual income.

burdens as a pct of earnings

The examples of several states highlight the importance of different variables in assessing the impact of student debt on any state’s economy.  The average debt of recent graduates from colleges in Vermont is in the middle among all states, yet the average loan balance of all borrowers in the state is higher than the debt levels of recent grads.  As a percentage of the earnings of working college grads ages 24-34, however, student loan debt in Vermont is the highest among all states. This suggests that recent grads (with their moderate level of debt) may be leaving Vermont while the state attracts or retains individuals with higher levels of student debt. It also suggests that the high percentage of the earnings of 24-34 year olds in the state that is absorbed by student loan debt service is, in part, a function of relatively modest average earnings  in the state.

avg debt and pct of earnings scatterplot

Another illustrative example is Georgia, a state with a relatively low average debt among recent graduates from its colleges, but with the highest level of debt among all borrowers of any state. From my limited experience in Atlanta, it is seems the city hasn’t been as overrun with northerners since Sherman’s march to the sea. This time the northerners have come armed with college degrees and promissory notes.  A state with below average student debt among recent graduates from its colleges but with above average student debt among all residents can’t address it’s high student loan debt burden by increasing state support for colleges or by providing more student aid.  Georgia appears to be gaining individuals with higher levels of educational attainment (“talent”) at a cost of higher student debt levels and greater debt burden among its residents. That is not a bad tradeoff as the state gets a more skilled workforce at a low cost to state government. Georgia reinforces a point that I repeatedly make, the importance of being attractive to skilled individuals with higher levels of educational attainment. NH makes this point as well, it has the highest average debt levels of recent graduates but relatively low average student debt for all borrowers in the state. We know NH losses a lot of its recent graduates to other states as I have documented in this blog and elsewhere, but attracts a lot of college graduates from other states, especially in the 25-40 age range.  These individuals, if they have student loan debt, have likely paid-off a good portion of it.  NH too has upgraded the skill of its labor force at a relatively low public cost by importing or attracting talent from other states.

New Hampshire, Vermont and Georgia are just three of many examples of how the debt levels of recent college graduates in a state must be interpreted with caution and in particular, when debating state-level policies directed at rising student debt levels. This brief analysis suggests different ways to assess the burden that student loan debt places on the residents of any state as well as on a state’s economy and shows that those burdens cannot be simply assessed by the most common assessment, looking at the average debt of recent college graduates. Reports on the average student loan debt of recent graduates by state can be an especially misleading indicator of the burden student loan debt places on any state’s economy.  I am not arguing here that student loan debt is not a problem, but like most public policy issues it is subject to errors of popular sentiment and conventional wisdom that can distort decision-making by policymakers. My purpose in this post is to explore some alternative measures (other than the average debt of recent graduates) of the impact that student loan debt has on each state’s economy. I welcome suggestions for better measures or criticisms of the ones examined or the methodology in this post.

“…..No Fury Like the Middle and Upper Classes Scorned”

November 1, 2013

College students rage against  a lot of things (including their parents as I have learned) but tend not to channel that energy into exercising  their right of franchise.   I think that helps explain why, after decades of rapidly rising college costs and levels of student debt, the tipping point on the issue appears to have finally been reached.   As I noted in a recent study on student debt, one of the features today that distinguishes debt to pay for higher education from prior periods when the issue bubbled to the surface is how much more of the debt appears to be being borne by parents as well as students.  Parent debt is not included in the popularly reported student loan debt by college or by state, but as the chart below shows, along with unsubsidized federal loans to students, federal parent “PLUS Loans”   have been the second fastest growing category of student debt.

Growth in Student Loans by Type

PLUS Loans are still a much smaller category of debt for higher education than are loans to students but there is no data available on the non-federal loans parents have accumulated (such things as home equity loans) to pay for their children’s education so overall parent debt has likely increased even more .  It is much easier to avoid the public debate about debt for higher education when it affects just students than it is to avoid when  it affects parents as well ( whom lawmakers are much more likely to respond to as constituents).  Another troubling aspect of the chart above is the increase in federal unsubsidized student debt.  Because the interest on this debt is not paid for by the federal government while a student is in college (unlike subsidized debt), it is more costly, and thus the higher percentage of unsubsidized debt today than a decade ago suggests that student debt levels actually understate the impact on students of the increase in student debt since 2001.

Examining data from the Federal Reserve Board’s “Survey of Consumer Finances” highlights how debt for higher education has increased over 20 years as a percentage of household’s non-mortgage debt, with the biggest increases coming since the mid 2000s.

H Installment Debt by Purpose

The chart above reflects both parent and student debt.  More of household installment debt going to pay for education implies less borrowing (and spending) for other purposes and helps explain (along with generally weaker economic conditions during much of the 2000s) why consumer expenditures on other goods have been relatively weak.  The economic implications of student debt are typically seen as constraining recent graduates spending, household formation, home buying, entrepreneurship, etc., but the reality is that student debt is likely constraining more than just recent graduates.  I think some evidence of this is seen in the changes in installment debt of households by income (chart below) .

Installment debt by income

As the chart  shows, the largest increases in  the percentage of installment debt that goes for education are among middle and higher income groups.  These are income groups with the most disposable income and anything that constrains them from “disposing” of their income (like repaying debt for higher education) on goods and services that boost economic activity will have detrimental impacts on the economy.  Lower income groups have seen significant increases in installment debt for education as well, much of it attributable to increased enrollment rates over the past few decades which have been highest among students from lower-income households.  With more students from families with modest incomes attending college, the share of installment debt for education among these income groups can be expected to rise.  Higher college costs also play a role but increases in financial aid for lower-income students have helped offset some but certainly not all of those cost increases.   In no way do I want to minimize the impact of college costs and debt on lower-income students and households but that has been a fairly consistent problem that does not distinguish the current situation from the past the way changes in debt among higher income groups appears to have changed.

The large increase in the percentage of installment debt that goes to education among middle and higher income groups reflects economic conditions (savings for education dropped the most among these income groups over the past decade) but also financial aid policies and practices of governments and colleges that appear to especially squeeze middle-income households.

The rapidly rising debt for education held by parents and households, not just students, I think explains a lot about the new urgency to address college costs and student debt.  The fact that middle and higher income groups seem more affected by these pressures than in the past may say even more about why the issue has risen on the public agenda.  Beyond the political, when the households that typically have the most disposable income appear to be especially affected by higher education debt, we should not discount the role debt for higher education may be playing in constraining economic activity in the U.S.

Productivity and Student Debt in NH

April 15, 2013

Student debt is in the news again today (as it is pretty much everyday) and because I am doing some work on higher education costs and debt, today I will highlight what some students (and others) at UNH were drawing attention to with their pencil sculpture using more than 30,000 pencils to highlight the average debt of students graduating from NH colleges and universities.

I’ve written before about how the cost of a higher education is affected by many things.  The level of tuition and fees, the volume and type of student financial aid, the demographics and characteristics of students at each institution as well as the interactions among all these factors affect student costs and debt.     It’s a complicated issue that seems to generate a wealth of simple and intuitive explanations.   NH policymakers debating the appropriate level of support for higher eduction are concerned with tuition prices, the efficiency of  higher education institutions, the impact of college costs on access to college, graduate’s debt, and the larger impacts of all of these on the economy.

The chart below highlights what NH students (and students everywhere) are concerned about.  The chart shows the average debt of graduates with debt (not all graduate s do so with debt) from UNH along with the average debt of students  from “flagship” public universities across the country.  Each state has one flagship university and I chose to use them here to control for the fact different types of institutions will have different characteristics that can affect average debt levels.  Just as importantly, state lawmakers in NH and elsewhere decide funding levels for public colleges and are often most interested in how public  higher education is affected by important issues.

UNH grad debt

The chart shows that the average debt of  UNH graduates (who graduate with debt) is higher and has risen faster than the national average for flagship universities.  The chart also shows that the per capita debt of graduates has been rising faster than the average debt of graduates with debt, both at UNH and nationally.    The more than 70 percent rise in per capita debt of graduates is especially troubling because it is a sign that more is being borrowed by each graduate but also that more students are graduating with debt.  Debt at UNH is higher but the problem is occurring everywhere.  The economic and social implications of the larger amounts of aggregated student debt on each successive cohort of young people are significant.

UNH’s high relative tuition among public, flagship universities across the country is not completely responsible for the debt levels among its graduates (although it is clearly a driving factor).  Demographic characteristics of student, financial aid policies, as well many other factors also play key roles.  UNH takes a lot of heat for its high tuition price and some see the high tuition as a sign of UNH’s inefficiency.  There are a lot of factors that help explain the rise in college costs but UNH’s high tuition isn’t readily explained by inefficiencies or “waste” compared to other public institutions.  Below is one  measure of efficiency I developed to compare colleges and their costs.  The chart below shows the direct educational and general expenditures per degree awarded at “flagship” public  institutions.  It is not a measure of quality.  A university could reduce its costs per degree awarded by teaching every class with 150 students or if it offered no student support services.  It will also reduce its costs per degree if it offered less grant and scholarship money.  The chart shows that UNH has the lowest cost per degree of any flagship institution in the country on this metric. In part it is a measure of efficiency as well as the characteristics of students because  a greater number and percentage of students who graduate will also lower expenditures per degree awarded.

exp per degree awarded

A couple of words about this metric.  First, I use a weighted degree measure that uses a bachelor’s degree as the baseline and assigns higher values to PhD and professional degrees and lower values to masters degrees to reflect the differing time (and thus costs)  related to obtaining each degree and to account for difference between institutions  on the mix of degrees awarded.  A university that awards medical degrees, for example, can be expected to have higher costs to educate each degree recipient (I need to examine how strongly the results are influenced by the weighting scheme).   I also adjusted the dollar figures to reflect differences in the cost of living in each state.  Wages, salaries and labor costs differ greatly across the country to compensate for differences in the cost of living and that should be reflected in the expenditures of public universities across the country.  It isn’t done often but when comparing expenditures of similar types of college I think it is a good idea.

The Surest Way to Limit the Cost of College is to Graduate on Time

February 5, 2013

Since my last post on the potential for a student debt crisis I’ve been asked several questions about what is happening in New Hampshire.  I can’t adequately answer those questions here but since it is being reported that the University System of NH is holding-off setting tuition rates until the next state budget is clearer, I thought I would take a quick look at one college cost trend in NH along with what I think is one important metric when considering the cost of college.

It is not an epiphany that the cost of college is rising faster than the cost of most goods and services and it is generally recognized that the cost of college at NH’s public higher education institutions is higher than the national average.  What is surprising is that over the past decade, costs at NH’s public 4 year  institutions have risen less than the national average.  I am not saying that they haven’t risen well above a comfortable rate, just that given the constraints of state support, tuition and fees, as well as total costs for in-state undergraduate students  at NH’s public colleges have risen more slowly than the national average.

Rise in Cost of Public Colleges

It sure didn’t feel that way over the past several years as I have had the pleasure of sending two children to different public universities identified as having among the highest costs of any public universities in the nation (UVM and UNH).  But a lower annual cost doesn’t mean as much if it takes more years for a student to graduate.  Fortunately a higher percentage of students graduate within 150% of “normal time”  at NH’s (and VT’s) public 4 year colleges than they do nationally (see chart below).  So far my students are 2 for 2 in graduating on-time and the next one is in the batters box in North Carolina, what are the chance that we can bat 1000?

Graduates within 6 years

The Looming Crisis in Student Debt

February 1, 2013

Student loan debt has grown much faster than other types of debt.  As the chart below shows, student loan debt has been exploding  and now exceeds both credit card and auto loan debt in the country.

Student debt volume

According to a recent study by Fair Issac Inc. (FICO), newer vintage loans have a much higher risk of default.  Higher debt loads for graduates and non-graduates have combined with protracted weakness in the labor market (especially for recent graduates) to produce a dramatic increase in the volume of  delinquent student loans.  Although the volume of student loan debt has never been close to the volume of mortgage debt in this country (mortgage debt peaked at about $9.3 trillion in 2008 while student loan debt is just now reaching $1 trillion), there is still the potential for rising defaults to have significant impacts on many financial institutions, if not the system as a whole.  The percentage of student loans that are seriously delinquent is currently twice as high as the percentage of mortgage loans that are seriously delinquent.  Despite student loans being a much smaller overall volume of debt than mortgages, the dollar volume of seriously delinquent student debt is over $30 billion and climbing compared to $8o billion of seriously delinquent mortgage debt on an aggregate balance that is nine times the volume of student loan debt.

seriously delinquent student debt

Rural Stresses and Yankee Values: Another Reason to Admire the North Country

December 19, 2012

I love NH’s North Country.  I didn’t grow up there but as a youth I festered in nearby state in a town along the Canadian border that also once had a thriving paper products industry and strong French Canadian accent.  In my elementary school we recited the Pledge of Allegiance in both English and French.

What I love most and what distinguished NH’s North Country from others with similar geography, industry or demographics is the Yankee values of hard work, honesty, integrity, frugality, and a more intense connection to earth that so many of its residents demonstrate.

With some notable exceptions, but on balance, rural counties across the country have struggled more with demographic and economic issues than have more urban and suburban counties over the past several decades.  Population and job growth trends and the demographic mix of Coos County have exposed that county’s residents to the economic equivalent of the “trials of Job”  in recent decades.  Thus I expected that data on delinquent debt by county would show Coos County residents to be far more likely to be behind in debt payments than most other counties in NH.  In fact, as the chart below shows, at the peak of debt delinquencies in the country (Q4 2010), Coos County had the lowest percentage of debt that was 90 or more days delinquent (summing the percentage of auto loan, credit card, and mortgage debt that was 90+ days delinquent).

delinquent debt by county

Whether it is the Yankee values of  “living within your means,” or doing whatever it takes to honor obligations, it surely wasn’t a robust economy and strong income growth that enabled Coos County to have the lowest aggregate severe delinquency rate.  I wasn’t looking for nor did I need another reason to admire and root for the North Country, but I found one anyway.



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