The Fantastic Rise of Student Loan Delinquency

Seriously delinquent student loan balances are nearly six times larger than 10 years ago.

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Student debt is growing in the U.S. – everyone knows that. But new data from the New York Fed show delinquencies are growing far more quickly.

Data from the Federal Reserve Bank of New York show that student loan balances have grown from roughly $320 billion in the fourth quarter of 2003 to nearly $1.1 trillion in the fourth quarter of 2013 (all dollars are 2013 dollars). That’s a more than threefold increase, but it is outstripped by the nearly fivefold increase in newly delinquent balances to $29 billion. Growth in seriously delinquent balances is even sharper, with the latest total – almost $27 billion – nearly 5.6 times higher than it was 10 years ago.

[READ: Is the Private Student Loan Market as Bad as it Seems?]

Student loan debt’s representation among delinquent balances is perhaps even more staggering. Student debt accounts for more than one-fifth, or 22.1 percent, of all new, seriously delinquent debt balances in the U.S., defined as balances that are 90 days or more overdue. That’s a sharp increase from just 10 years ago, when student debt accounted for only 6.2 percent of these balances.

The same appears true of other delinquent balances as well. Student debt 10 years ago accounted for 3.4 percent of all new delinquent balances. Now it’s 14.6 percent, while student loans altogether account for only 9.4 percent of all debt.

The growth in student debt delinquencies isn’t just a tale of a growing population of heavily burdened college graduates. While it is a result of growing student loan debt, it comes alongside a marked decline in other delinquencies, particularly mortgage delinquencies.

What it reflects is a change in the debt landscape and, likewise, the American economic landscape. Americans have shrugged off a large share of the high mortgage debt that had accrued in the runup to the economic crisis, helping total debt balances and total delinquencies to fall. However, student debt has continued to grow rapidly in both balances and delinquencies, displacing some of the other declines in mortgage debt and credit card balances.

And while growing student debt may not constitute a massive bubble that will create widespread economic wreckage (as Jordan Weissman eloquently argued last year), it is a very quickly growing economic weight on millions of Americans. And for some debtors, student debt is not yielding returns that justify the costs, which is causing a drag in spending and household formation and, therefore, economic growth. Think of it as a slow bleed rather than a “pop.”

Corrected on Feb. 19, 2014:

The axes in the first chart in this post were originally mislabeled.