From Bad Debt to Worse Debt
Posted at 9:45 a.m. on Jan. 31
Matthew O’Brien explains why the ways that Americans are reducing their debt load — commonly known as deleveraging — may actually make them worse off in the long run.
“The story of the post-crash economy has been one of people borrowing to go to school instead of to buy houses. Student loans are up $317 billion. Mortgages are down $1.3 trillion — with often-underwater households defaulting en masse… The people who owe less than before can’t borrow, and the people who can borrow don’t owe less than before. ”
It is also worth noting that while much of the deleveraging is due to foreclosures, student loans are much more difficult to discharge.