Recently a short excerpt from an Arkansas Democrat Gazette newspaper, concerning consumer debt in the United States, caught my attention. Hopefully you saw it also, because the topic of debt can be frightening. It had been taken from a Bloomberg News article which prompted me to resort to Google for additional insight into the subject. According to Bloomberg News, American households' total outstanding debt reached a record high of $13.1 trillion in last year's fourth quarter. The Federal Reserve Bank of New York released the data which shows that for the fourth straight quarter borrowing reached a new record. There was a 3.2 percent gain in credit card borrowing at the same time that 7.44 percent of credit card balances were 90 days or more past due.
Maybe our government spending is contagious and "so goes Washington, so goes the nation." Our national debt continues to climb and the recent Trump budget proposal and tax cut plan will add another trillion or so to the debt. During the Obama administration we apparently added $7.4 trillion to our national debt. According to the internet, our national debt was $75,463,476.52 on Jan. 1, 1719, and the last time our nation was debt-free was Jan. 8, 1825, when Andrew Jackson was president. Compare those numbers to where we are today and you can see where the consumers in America might see Washington as an example.
Student loan debt is just part of our consumer debt crisis. However, it is a major issue that must be dealt with by the student in the years following graduation. I found no information that guaranteed the graduate (he or she) would earn enough to justify the extra borrowing in any specific number of years. As a means of paying for the college program, however it can be a means of affording to continue one's education. What I did find are some numbers which are reported covering student loans. Student loan debt statistics do seem to vary by the website doing the reporting. The two sources I researched were "Makelemonade" and "Student Loan Hero." One number they agree on was the total number of borrowers -- slightly over 44 million. That must include students who have completed their degrees and are (hopefully) working as well as those still in school. Depending on when those numbers were compiled, it could include some of my grandchildren.
There was a slight discrepancy in the total outstanding debt for student loans, but it could have been a result of the year used and some rounding error. The total must be somewhere between $1.3 trillion and $1.48 trillion. The good news, particularly for those in this number, approximately 20.4 percent or 9 million of the outstanding loans are $5,000 or less. Approximately 46 percent of the borrowers had debt of $5,000 to $25,000. The category of $25,000 to $50,000 was approximately 19 percent of the total. These numbers are significant to our nation's long-term future if we have an educated workforce unable to repay their debt because they cannot find jobs comparable to their educational skills or we have a major economic down turn.
There are some interesting statistics on student loan debt that might help us understand the cost of living increases over our lifespan if we consider them in today's context. These figures are from a 2012 study which shows that 71 percent of the graduating students (1.3 million students) had student loan debt. Of the students graduating from public colleges (such as the University of Arkansas system), 66 percent had student loans with an average debt of $25,500. That would be similar to the loan on a new car accrued over the college period. That is much different than the GI Bill which provided for my college education by my serving in the military.
From June 2016 data, the average new car loan was $30,032 with an average monthly payment of $503 and an average length of loan for 68 months. According to student loan information, the average monthly payment was $351 on the 2012 data. The total amount of the loan and the duration of the loan was not given.
We have allowed ourselves to become a nation of consumers from education to transportation to luxury items -- mostly on credit cards, car loans and through student loans. The reminders of the Depression years affected previous generations much differently than my children and grandchildren today. My childhood memories do not include Florida weekends and trips to Disney Parks, foreign travel and a personal car.
But we were taught to save a part of what we earned and keep credit use to a minimum.
Certainly credit to start a business can be a necessity but the old adage about "saving for the future" seems to have lost its appeal.
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Editor's note: Leo Lynch, an award-winning columnist, is a native of Benton County and has deep roots in northwest Arkansas. The opinions expressed are those of the author. He is a retired industrial engineer and former Justice of the Peace.
Editorial on 02/21/2018