Student Debt Continues to Rocket: NY Fed
NEW YORK (TheStreet) -- Student debt continues to climb, even as other forms of consumer debt decline, according to the latest quarterly report on household debt published by the New York Federal Reserve.
Student loans grew by $20 billion during the first quarter to a total of $986 billion as of March 31, 2013. This has been the only category of household debt to grow during the great recession and is now the biggest form of household debt next to mortgages.
The delinquency rate on student loans -- the proportion of student loans that are more than 90 days behind on their payment -- declined to 11.2% in the first quarter from 11.7% in the fourth quarter. But this figure understates the number of problem student loans as nearly half the loans are currently in grace periods or deferment or forbearance.
Excluding such loans, the delinquency rate would be higher, the NY Fed said. In an earlier study, the NY Fed found that 6.7 million borrowers or 17% were more than 90 days behind on their payments. Excluding borrowers who are not technically required to make payments because they were in a period of forbearance, nearly 30% of the borrowers were delinquent.
The average student debt per borrower stood at $24,810 as of December 31, 2012. The outstanding debt tends to be highest in the northeast states and in the south, according to the report.
West Virginia has the highest student delinquency rate at 18% , while South Dakota has the lowest at 6.5%.
About 16% of people with a credit report have student debt in the U.S, with the ratio climbing to 25% in the District of Columbia.
The sharp increase in student debt since the recession has sparked concerns of a new subprime crisis -- this time in student loans.
The rising cost of college education has made it impossible for most students to go to college without a loan. At the same time, going to college has become something of a necessity for those seeking a job in a sluggish market, although a college degree is no guarantee of employment.
Students graduating in a recession have been unable to find jobs that will help them repay their loans. Because student debt cannot be discharged through bankruptcy, many struggling borrowers remain stuck with thousands of dollars in student debt for decades.