Wednesday, May 21, 2014

More Polite Handwringing About Student Debt Mess | naked capitalism

I don’t mean to point fingers at a perfectly unobjectionable article by Neil Irwin at the New York Times’ Upshot feature. It gives a compact, highly readable summary of some new information on student debt in the latest report on household debt from the New York Fed, and a related post on its Liberty Street Economics website. However, readers who have been following burgeoning student debt problems are likely to find the anodyne tone of the Times article and the underlying New York Fed work a tad aggravating.

The New York Fed has endeavored to determine whether student debt is undermining the recovery. One element that has a lot of commentators concerned is the low level of household formation and homebuying among the young. It’s not hard to see that a terrible job market for college grads is a big culprit. But the New York Fed fingers that student debt is clearly playing a role, as one might expect. If jobs are hard to find and generally not as well paid as before the crisis, it’s going to make all but the high fliers or those with rich parents cautious about making a commitment like buying a house. And those with debt they can’t discharge in bankruptcy are already burdened and in less of a position to take risks.

This is the chart that supports that intuition:

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