The Hefty Yoke Of Student Loan Debt
Career College Central summary:
More than five years after the binge of irresponsible lending led to the credit crisis and Great Recession, the amount of consumer debt in the United States has begun to rise again, but with an important difference. Fewer consumer loans became seriously delinquent last year than in any recent year, the Federal Reserve Bank of New York reported last week. Except for one type of debt: student loans. There delinquencies continue to rise, and loans continue to be made without regard for the ability to repay.
At one time, student loans were a clear way to provide economic opportunity to people who might not have been able to attend college otherwise. In many cases, they still are. But increasingly it is becoming obvious that student loans are creating large problems that may persist for decades to come. They will impoverish some borrowers and serve as a drain on economic activity.
Until 2009, young adults with student loan debt were more likely to own homes and were more likely to have car loans outstanding than were people of the same age without student loans. Those loans had enabled many of them to obtain college degrees and earn more money, qualifying them for mortgages. Those with student loans generally had better credit scores than those who did not. But now the opposite is true. “Young people with student loans are less likely to buy a house,” said Wilbert van der Klaauw, a senior vice president of the New York Fed’s research and statistics group.
Those with student loan debt also are less likely to have taken out car loans. They have worse credit scores. They appear to be more likely to be living with their parents. A lot of people are defaulting. The New York Fed report shows that while seriously delinquent personal loans have generally been declining since early 2010, delinquent student loans have been soaring. The report, for the fourth quarter of 2013, showed that 11.5 percent of such loans were at least 90 days behind in payments. In credit cards, traditionally the type of loan most likely to default, the rate was just 9.5 percent.
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THE NEW YORK TIMES