Federal student loans are the only consumer debt segment with continuous cumulative growth since the Great Recession. As the costs of tuition and borrowing continue to rise, the result is a widening default crisis that even Fed Chairman Jerome Powell labeled as a cause for concern.
Student loans have seen almost 157% in cumulative growth over the last 11 years. By comparison, auto loan debt has grown 52% while mortgage and credit-card debt actually fell by about 1%. There’s a whopping USD 1.5 trillion in student loans out there, marking the second-largest consumer debt segment in the country after mortgages, according to the Federal Reserve. And the number keeps growing.
Student loans are being issued at unprecedented rates as more American students pursue higher education. But the cost of tuition at both private and public institutions is touching all-time highs, while interest rates on student loans are also rising. Students are spending more time working instead of studying. 85% of current students now work paid jobs while enrolled. Experts worry that the next generation of graduates could default on their loans at even higher rates than in the immediate wake of the financial crisis.
Student loan debt currently has the highest 90+ day delinquency rate of all household debt, including mortgages, credit cards and auto loans. More than 1 in 10 borrowers is at least 90 days delinquent, while mortgages and auto loans have a 1.1 percent and 4 percent delinquency rate. While mortgages and auto loans have experienced an overall decrease in delinquencies since 2010, student loan delinquency rates remain within a percentage point of their all-time high in 2012.
Source: Bloomberg Data