Finance experts have long estimated that America’s student loan debt has swelled past $1 trillion, but a new report offers startling insight into exactly what consumers are up against. Since 2003, student loan debt has nearly tripled from $293 billion to a whopping $904 billion, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit. The figure jumped $30 billion in the first quarter of 2012 alone.
In contrast, all other forms of consumer debt have seen stark declines, with a total $1.53 trillion reduction.
“Student loan debt continues to grow even as consumers reduce mortgage debt and credit card balances,” said Donghoon Lee, senior economist at the New York Fed. “It remains the only form of consumer debt to substantially increase since the peak of household debt in late 2008.”
The report goes on to confirm what consumer watchdogs like the Consumer Financial Protection Bureau have been reporting for months – that students young and old are facing mountains of debt without sufficient means to pay it off.
The 90-day delinquency rates for student loans jumped from 6 per cent in 2003 to 8.69 per cent at present – far higher than delinquency rates for mortgages, auto loans and home equity loans. There’s an estimated $67 billion worth of unpaid student loan debt in the nation, and it’s prompted the federal government to enlist hoards of debt collectors to claw back funds from the public.
It’s not difficult to imagine why consumers would prioritise their mortgage over student debt, as foreclosure rates are on the rise and student loans – or federally-backed loans, at least – are generally easier to defer.
Consumers carry, on average, about $12,800 in student loan debt. Legislation that would make it easier for alumni to discharge loan debt in bankruptcy is currently making the rounds in Congress.
Photo: New York Fed