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Federal Student Loan Balances Rise, Delinquencies Hit Record High

November 27, 2012

The Quarterly Report on Household Debt and Credit, published by the New York Fed provides an overview of Americans' total consumer debt by type-including credit cards, home mortgages and equity loans, automobile loans, and other revolving and non-revolving debt. The report for the calendar quarter ending September 30, 2012 found that Americans had $11.31 trillion in total debt. While mortgages accounted for the largest category of debt (roughly 71 percent), student loans have been the fastest growing category. Federal, state, institutional, and private loans for higher education accounted for $956 billion (8 percent of total debt) as of the September 30, 2012; on March 31, 2003, student loans accounted for less than 2 percent.

From the second to third quarters of 2012, student loans increased even as other forms of debt declined. Mortgage balances, for instance, fell 1.5 percent from June 30 to September 30, 2012, and home equity lines of credit declined 2.7 percent. Total credit card debt rose by $2 billion, but aggregate credit card limits fell 0.3 percent, the total number of open credit card accounts declined slightly, and the number of credit inquiries-an indicator of consumer credit demand -decreased. In contrast, total outstanding student loan debt rose 5 percent. Loans for new and used car loans rose 4.4 percent to $85.8 billion. Total automobile debt (newly acquired debt and loans in repayment) reached nearly $792 billion, roughly 7 percent of total outstanding consumer debt.

Total aggregate consumer debt fell by $74 billion from the second to the third quarter of 2012. As of September 30, 2012, total consumer indebtedness declined nearly 11 percent from the record level of $12.68 trillion record reached at the end of the third quarter of 2008.

Rising Student Loan Delinquencies

The New York Fed report also suggests that more student loan borrowers have run into difficulty with meeting their loan obligations. Of the $42 billion in new student loan debt, $19 billion (45 percent) was attributed to previously defaulted student loans that were newly updated on borrowers' credit reports during the quarter. In addition, the percentage of student loan balances 90 or more days delinquent rose from 8.9 percent to 11 percent from the second to third quarter. Student loan delinquencies have risen sharply over the past ten years. In the first quarter of 2003, approximately 6 percent of student loan accounts were 90 days or more delinquent.

The trends in student loan delinquencies stand in sharp contrast with other types of consumer debt. Mortgage delinquency rates dropped from 6.2 percent in the second quarter of 2012 to 5.9 percent in the third quarter, while the share of home equity lines of credit delinquency 90 days or more held steady at 4.9 percent. The percentage of auto loan repayments late 90 or more days also held steady, at approximately 4.2 percent.

Overall delinquency rates improved slightly, with 8.9 percent of total outstanding consumer debt was in some stage of delinquency as of September 30, 2012, compared with 9 percent on June 30, 2012. About $740 billion of total debt was at least 90 days late.

Copies of the Quarterly Report on Household Debt and Credit are available for no charge from the New York Fed's website.


Ken Redd
Director, Research and Policy Analysis