For many American households, life is looking better than it did just a few years ago: The pressure to pay up has receded.
The rate of serious loan delinquency for people with mortgages, credit cards or auto loans has dropped in recent quarters, according to data released recently by the Federal Reserve Bank of New York.
“The overall picture points to continued signs of healing in consumer credit markets,” the report concludes.
Yet there is one very striking exception.
More people are taking out student loans, while at the same time the people who have taken out student loans appear to be struggling even more than they were during the recession.
The amount of student loan debt has tripled since 2004 and stands today at nearly $1 trillion.
“Student debt is the only kind of household debt that continued to rise through the Great Recession and has now the second largest balance after mortgage debt,” the report notes.
At the same time, the percentage of borrowers with student loans in serious delinquency has risen to 17 percent. Moreover, the delinquency rate is expected to rise in the near future as more student loans move beyond their forbearance period, when no repayment is expected, to the time when borrowers must pay.
Many of those who borrowed no doubt envisioned that a college education would yield a better financial future for themselves.
Indeed, the median weekly earnings of workers with a bachelor’s degree or higher are roughly double those of high school graduates. The unemployment rates for those with bachelor’s degrees are much lower, too.
Those advantages to a college degree have helped drive a boom in college loans. The number of people borrowing has risen 70 percent since 2004.
So, too, has the average loan balance. It is now $25,000 per person, up from roughly $15,000 in 2004.
In January, Sen. Richard J. Durbin (D-Ill.) introduced legislation that would allow borrowers to more easily discharge student loan debts during bankruptcy. At least some financial companies are opposed, arguing that it will increase the cost of private credit for student borrowers, among other things.
The “cost of attending college has continued to skyrocket over the last decade, and the recently introduced legislation will only exacerbate, rather than alleviate, the burden on American families seeking to finance their children’s education,” the American Securitization Forum said in a letter to lawmakers Friday.
Either way, as the rising delinquency rate suggests, those investments aren’t working out for all students.
Anthony P. Carnevale, director of Georgetown University’s Center on Education and the Workforce, said too few students take into account how much they will earn after four years studying, say, Shakespeare.
His research has shown that while some degrees, especially in technical fields, can yield a healthy income, others do not.
“This money is too easy,” Carnevale said. “We’re just throwing money out the window. We don’t demand that the students, or the institutions, or the government which is subsidizing these loans, take any responsibility to make sure that this money is well-invested.”