Making Sense of Comparing Student Debt to Credit Card Debt

Sandy Baum and Michael McPherson of the Chronicle of Higher Education’s blog, Innovations, pulled hair over the relevancy of comparing the $900 billion of student debt with the $800 billion of credit card debt, claiming the comparison is unhelpful. Given that both’re types of consumer debt that many Americans have (difficult) experience with and that the government doesn’t separate student debt from other nonrevolving credit, I think they’re being glib. Perhaps a little contextualization will allow us all to save some face.

Just last week those folks everyone hates at the Federal Reserve released an update on outstanding consumer credit, its G.19 Report. If you notice, starting in 2009, revolving credit drops substantially, almost 10%. Nonrevolving credit drops slightly, but note how the Fed defines it, “[A]utomobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations. These loans may be secured or unsecured.” Auto loans can be crammed down in bankruptcy, i.e. renegotiated, so I suspect that’s what accounts for the 2009 drop in nonrevolving credit. Meanwhile, we know student loans are nearly bankruptcy-proof, which must be fueling nonrevolving credit growth. As for the continuing drop in revolving debt: good job ditching that credit card debt America!

The Fed annualizes the preliminary February 2011 data to 7.7%, so this year is seeing a lot of nonrevolving credit growth that will likely add another $100 billion to the total. Let’s hope it’s in auto sales and not non-dischargeable student loans.

Note that credit card debt comprises more than half of all nonrevolving credit and more than one third of all consumer debt. Not that that’s a meaningful comparison to anything—just sayin’ though.



  1. Here is a meaningful observation: One of the key issues overlooked by many of the articles about student loan debt is that student loans in the USA retain a huge chunk of money within the US economy, as opposed to consumer based products bought on credit cards. An overwhelming amount of consumer products are produced and imported from over seas, while American education is in our backyard. Student loans have kept American universities in business, and in turn this keeps a large population employed.
    American consumer goods may have been uncompetitive on the free market resulting in lost sales, but by golly the education is American and they have not found a way to outsource it. However, the school systems must improve their quality to justify ever increasing tuition, or we will begin to see student’s outsourcing themselves to foreign colleges.

  2. Sandy Baum used to, she might still, work for the College Board. Her views are going to defend the industry, because the College Board USED to be a lender, and still services outstanding debt. Why she is regarded as a credible source . . . you got me. I am also tired of the College Board being cited as a neutral source, and have been insisting that their arguments be taken with a grain of salt.

    Great piece, Matt.

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