Student loan debt continues to both grow in size and deteriorate in quality, while total US debt moves in the opposite direction

Both student loan debt and student loan delinquency rates continue to grow, according to fourth quarter data released by the New York Fed. Even though delinquency rates in general have stabilized since the crisis and the US has less debt overall, student loan continues to buck both of those trends signaling the need for some kind of change.

total us debt

us total debt delinquencies

Student loans make up 10% of US debt

Outstanding student loan balances increased to $1.16 billion in the fourth quarter of last year, that’s a $31 billion increase over the previous quarter and a $77 billion increase year-on-year (student loan debt doesn’t increase steadily over the course of the year). That makes student loans the second largest category of US debt behind mortgages, about 10% of total debt.

Student loans are the most likely to be delinquent (n.b. which doesn’t mean they account for the largest balance of delinquent debt), as credit card and mortgage delinquencies have both fallen steadily since the financial crisis, but student loan delinquencies continue to rise.

US loan delinquencies by balance

You can also see this as balance of new delinquent debt (30+ days past due) and new seriously delinquent debt (90+ days past due) have fallen by more than half since 2009, but there is almost no change for student loan debt specifically.

student loan new delinquencies

student loan new serious delinquencies

 

Student loans impact the housing market

Student loan debt has been growing for a long time, so the New York Fed data isn’t surprising, but it does confirm that a problem (some people call it a bubble) continues to grow. The burden of mounting student loans is partially to blame for the slowly recovering housing market, since young people who would normally be looking for their first home are still paying for college instead, and those who would like to trade up are faced with a soft market.

While it’s not literally impossible to get rid of student loans through bankruptcy, it is extremely difficult and proposals to make it easier haven’t gotten much traction yet. While it wouldn’t be a cure-all, letting lenders shoulder some of the burden (especially in the case of for-profit universities with extremely low graduation rates) could at least cut out some of the abuses that pile on debt without actually helping people’s career prospects.