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posted on 28 May 2016

Serious Delinquency Rates For Student Loans Remain High

from the St Louis Fed

Serious delinquency rates [1] for auto and student loans both rose during the recession. However, only the rate for auto loans hit a peak and fell, according to the most recent issue of In the Balance.

Don Schlagenhauf, chief economist for the St. Louis Fed's Center for Household Financial Stability, and Lowell Ricketts, the Center's senior analyst, examined the trend in delinquency rates since 2003 for both the nation and the Eighth District [2] as part of their recently released Quarterly Debt Monitor. This offering will track and analyze new developments in and delinquency measures for select types of consumer debt.

The authors found that the serious delinquency rate for auto loans peaked at close to double the prerecession rate, as seen in the figure below.

serious delinquencies on auto loans

Serious delinquency rates for student loans, on the other hand, rose but never declined substantially, as seen in the figure below.

serious delinquencies on student loans

Schlagenhauf and Ricketts noted that the actual rate may be even higher for student loans, as many are in deferment, grace periods or forbearance, and are not actually in the repayment cycle.

The authors wrote that the implications of high serious delinquency rates for student loans aren't clear. They noted: "However, a large share of young borrowers saddled with severely delinquent loans may inhibit aggregate economic growth as this group is unable to participate in other economic activities, such as buying a home or saving for retirement."

Source

https://www.stlouisfed.org/on-the-economy/2016/may/serious-delinquency-rates-student-loans-remain-high

Disclaimer

Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

Notes and References

1 Serious delinquencies are those with payments overdue by at least 90 days.

2 The Eighth District includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

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