Motley Fool co-founder and CEO Tom Gardner recently met up with the CEO of a large private investment firm (whose name we'll keep anonymous). Asked where he thinks trouble lurks in the economy, the CEO's views were sharp: "Student loans. You have a disaster in the making. My feeling is it will all fall apart in the next 24 months," he said.
"Virtually all of the collapses and all the scandals throughout financial history revolve around fixed income and debt. Just keep sniffing around those areas and you're going to find the problems," Tom recalled him saying.
This isn't a rare view. Many have pointed to student loans as the next shoe to drop. For-profit education companies like Corinthian Colleges (NASDAQ: COCO) and Apollo Group (NASDAQ:APOL) have seen their share prices shredded as it becomes apparent that the free-for-all student debt binge isn't sustainable.
The Federal Reserve has a nice report on student loans. Here are seven charts that put the boom into context.
1. Since 2004, all consumer debt has declined -- except for student loans, which have surged threefold:
2. Student loan balances have increased for all age groups. By percentage growth, the biggest gains have been borrowers age 60 and up:
3. This actually throws cold water on those who say student loans are burying most students in debt. The vast majority of student loan balances are under $25,000. The average car loan is more than the average student loan:
4. Still, the portion of young Americans with debt is surging:
5. And more and more of them are falling behind on their student loans:
6. Many are just kicking he can down the road:
7. And that has an impact on other parts of the economy. Young Americans with the most student debt have shunned buying a home more than any other group: