Student Loan Delinquencies Jump As Crisis Spreads

Friday, August 14, 2015
By Paul Martin

Increase comes despite lower loan delinquencies overall. Poor servicing likely a culprit, former regulator says

Shahien Nasiripour

The share of Americans behind on their student loan payments jumped over the past year despite the improving economy, new data released Thursday show.

About 11.5 percent of outstanding student debt was at least 90 days late or in default as of June 30, up from around 10.9 percent at the same time last year, according to the Federal Reserve Bank of New York. The New York Fed estimates that nearly one in four borrowers whose loans have come due are severely delinquent, or double the published rate, because nearly half of student debt doesn’t presently require a monthly payment.

By contrast, the share of total household debt in distress fell to 3.98 percent, New York Fed data show. The figure hasn’t been below 4 percent since 2007.

At roughly $136 billion, the total amount of student debt that’s severely delinquent or in default is more than all other distressed non-mortgage debt combined, a reversal from last year, New York Fed data show. Non-mortgage debt carried by households includes auto loans, credit cards, home equity lines of credit and other personal loans.

The increase in student debt woe comes despite a growing U.S. economy that’s adding jobs and raising workers’ wages. Student debt pain also is spreading despite a significant jump in the number of borrowers enrolled in generous government programs that allow them to make payments on their federal student loans based on their earnings, and high-level attention from the White House to fix what President Barack Obama described in 2013 as a “crisis in terms of college affordability and student debt.”

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