USA- Student Loan Debt Rises as Most Other Debt Falls

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Student Loan Debt Rises as Most Other Debt Falls

Take steps now if you're worried about slipping into delinquency.

By KATY HOPKINS

August 30, 2012

A rising percentage of borrowers are late with payments.

It's not just the heat that rose this summer: Both the total student loan debt and the percentage of borrowers who aren't making timely payments increased, too, according to the Federal Reserve Bank of New York. 

In its "Quarterly Report on Household Debt and Credit," the New York Fed found that education debt totaled $914 billion as of June 30—up $10 billion from March 31. Unlike student loan debt, the amount owed on some other forms of debt, such as mortgages and home equity lines of credit, has decreased. 

"Since the peak in household debt in [the third quarter of 2008], student loan has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion," the report notes. 

[Read an opinion of why outstanding student loan debt needs a long-term solution.] 

In another increase as of June 30, 8.92 percent of student loan borrowers were at least 90 days late on their payments—in what's known as delinquency—up from 8.69 percent in March and 8.45 percent the quarter before. That's higher than the delinquency rate for other categories of debt, including home equity lines of credit and automotive, which each posted rates below 5 percent this quarter.

The percentage of delinquent student loan borrowers is slightly less than that of credit card debt holders and those owe debt in the New York Fed's "other" category who are in delinquency (10.9 and 10.24 percent, respectively). 

[Consider federal repayment plans that relieve student debt.] 

But the actual delinquency rate for student loan borrowers may be about twice as high, according to the New York Fed, "because almost half of these loans are currently in deferment, in grace period, or in forbearance and therefore temporarily not in the repayment cycle." 

Students experiencing financial hardship can take steps toavoid delinquency. Contact your student loan servicer to ask about opportunities to lower or postpone your payments, and don't be afraid to reach back to your college's financial aid office with questions, too. 

[Get online counseling for federal student loans.] 

If you're considering borrowing to help pay for college, be sure to research your options and determine a smart amount to borrow, based on your financial situation, academic major, and career plans.