Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam's balance sheet?
|A) U.S. Official Reserve Assets|
B) Total Mortgages
C) Taxes Receivable
D) Student Loans
As I point out on the chart, the two callouts are for Q4 2007, the quarter in which the Great Recession began (December 2007) the most recent quarter on record, Q1 2012. The loan balance has risen and astonishing 332% over that timeframe, most of which dates from after the recession.
This chart only includes federal loans to students. Private loans make up an even larger amount. Earlier this year the Consumer Financial Protection Bureau (CFPB) posted an article with the attention-grabbing title: Too Big to Fail: Student debt hits a trillion. The details of the private student loan market are not readily available, but CFPB plans to publish its study results on the topic this summer.
But back to our quiz. Student loans may be a liability on the consumer balance sheet, but they constitute an asset for Uncle Sam. Just how big? Nearly 35% of the total federal assets, over four times the 8.6% percent for the total mortgages outstanding.
Of course, assets are, sadly, the trivial side of Uncle Sam's Flow of Funds balance sheet -- about 1.36 Trillion. The liability side totaled 12.65 Trillion at the end of Q1 (details here).
Student loan debt is something we'll want to continue watching, especially when more details of the private loan market becomes available.
Footnote: For those who wonder how much the pie chart above differs from the Q4 2011 version, here's the previous version, based on the data reported in the March 8, 2012 release.