For the first time in history, the federal government holds more nonrevolving consumer debt than commercial banks in the United States, thanks to a surge in government-issued student loans since 2009.
(Nonrevolving consumer credit includes loans with fixed repayment plans, like student loans and auto loans, as opposed to revolving credit, which includes things like credit cards.)
This little detail from yesterday’s monthly consumer credit release was pointed out by NBF Chief Economist Stéfane Marion in a note to clients following the release.
According to the latest data, the government now holds $552.69 billion in student loan debt –versus commercial banking institutions’ holdings of all nonrevolving consumer credit, which only amounts to $545.7 billion.
Check out the chart on the right:
Photo: NBF Economy & Strategy (data via Federal Reserve and IHS)
As today’s Hot Chart shows, non-revolving credit (70% of credit outstanding) has been
the only source of growth in the past year as revolving credit (credit cards for the most part) continues to stall.
This being said, the bulk of the increase in non-revolving credit is not going towards purchases of durable goods. Student loans remain the primary driver of consumer credit growth with a 24% annual gain. Were it not for them, nonrevolving credit would actually have been up only 2.9%.
The surge in student loans, which now account for 28% of total nonrevolving credit outstanding, has dramatically altered the credit landscape. As shown, the Federal government, which originates most of student loans, actually surpassed depository institutions in January as a primary holder of nonrevolving credit.
Needless to say, the surge in student debt could become a significant problem down the road if labour markets fail to provide employment for younger workers.
For the moment, growth in federally-issued student loan debt shows no signs of slowing down.
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