Barron's - Amey Stone - 04 April 2017
Household debt has been rising for the past three years, but it is student loan debt that has by far the most delinquencies. And that’s troubling for the future of economic growth, New York Fed President William Dudley said in a speech Monday.
According to the New York Fed’s quarterly report on household debt and credit (pdf.), student loan balances increased by $31 billion last year to $1.31 trillion. That compares with credit card balances of $779 billion.
More alarming: The share of student loans more than 90 days overdue increased to 11.2% while seriously delinquent credit card debt stayed at 7.1%. Auto loan delinquency rates were at 3.8% and mortgage loans at 1.6%.
Here are some key points from Dudley’s speech:
- Student debt has increased more than five-fold over the past 14 years, with more young adults taking out loans and borrowing larger average amounts. And, while debt delinquency rates overall have fallen, those for student debt have remained elevated.
- Our analysis reveals that those with significant student debt are much less likely to own a home at any given age than those who completed their education with little or no student debt.
- For a large share of households, housing equity is the principal form of wealth. Thus, changes in the way we finance post-secondary education could also have important implications for the distribution of wealth.
- Colleges that offered the largest number of low-income students pathways to upward mobility have become less accessible to them during the 2000s. As a result, higher-education’s contribution to increasing intergenerational mobility has diminished.