Line of Reasoning Activity

Reorder the following

• New information helps explain why consumers have been cautious in recent months, despite a better job market and cheaper gas.

• The usual explanation is that consumers are still paying down debt and building up savings — and will return to freer spending ways in due time. But a report this week from the Federal Reserve Bank of New York challenges that view.

• The report shows that outstanding household debt increased by one percent from the third to the fourth quarter of 2014, to a total of $11.8 trillion as of Dec. 31.

• Balances were up in all major borrowing categories, including mortgages, student loans, auto loans and credit cards. In two of those categories — student loans and auto loans — delinquency rates worsened.

• Researchers at the Fed zeroed in on student debt as a probable cause of weak spending.

Reorder the following

• Researchers at the Fed zeroed in on student debt as a probable cause of weak spending.

• The data confirm what has been noted before: That student loan delinquencies and repayment problems appear to be reducing the ability of young adults to embark on “household formation,” a.k.a. getting married, starting a family and buying a house — all of which portend steady and rising spending.

• Worse, the Fed report found that the drag of student debt lasts longer than previously believed. Much of the public discussion about student loan defaults is based on analyses that look at loan performance over two and three years.

• The report found rising default rates in years four through nine.

Reorder the following

• Worse, The Fed report found that the drag of student debt lasts longer than previously believed. The report found rising default rates in years four through nine.

• Another sobering finding is that many student borrowers who are current today are likely to have had serious payment problems in the past. That suggests enduring credit problems.

• The report found that only about 63 percent of borrowers appeared to have avoided delinquency and default altogether.

• For the economy to thrive, young adults need ways to get an education without taking on ruinous debt. They need plentiful jobs that pay them enough to shoulder their debts.

Reorder the following

• Another sobering finding is that many student borrowers who are current today are likely to have had serious payment problems in the past. That suggests enduring credit problems.

• The report found that only about 63 percent of borrowers appeared to have avoided delinquency and default altogether.

• For the economy to thrive, young adults need ways to get an education without taking on ruinous debt. They need plentiful jobs that pay them enough to shoulder their debts.

• And when those jobs are not forthcoming — as has been the case for years now — they need relief and repayment plans, so that their problems today do not become lasting, economy-wide problems.

• Outstanding student loan balances now stand at nearly $1.2 trillion, an increase of $77 billion in the past year. They are a drag on spending now and are likely to remain so for a long time to come.

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