Student loan balances and delinquencies are rising.
That is the worrisome news from an otherwise positive household debt and credit report for the fourth quarter of 2014 released Tuesday by the Federal Reserve Bank of New York.
The broader picture of household indebtedness is more encouraging. Household borrowing is up across the board, with total household debt rising to $11.8 trillion, up 1 percent on the quarter and 3 percent on the year.
Economists generally view growth in consumer credit as good news. Total household debt is still nearly 7 percent below the late 2008 peak, when the housing market bubble’s collapse left millions of families with mortgages they struggled to repay.
Since then, Americans gone through a long process of limiting debt-financed purchase, shoring up their finances and deleveraging.
Now, with delinquencies down since the days of the subprime crisis, families are borrowing again.
But within that trend, one cause for concern is the explosion of student debt, which has doubled since the start of the recession to $1.16 trillion.
The share of student loan balances at least 90 days past due rose from 11.1 percent to 11.3 percent in the quarter, higher than any other form of consumer credit.
“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student loan balances and delinquencies is concerning,” New York Fed researcher Donghoon Lee said in a statement with the report. “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”
Many economists expect student loan delinquencies to keep rising as the effects of the recession wear off, as the large cohort of students who entered college during the worst of the jobs crisis end their post-college grace periods and begin repayments.
Economists at the New York Fed and elsewhere have questioned whether the burden of student loans is holding young people back from making big-ticket purchases, especially for homes. The share of first-time home buyers, at around 30 percent, was at a three-decade low in 2014, according to the National Association of Realtors. Historically around 40 percent of home buyers are first-time owners.
The problem of student indebtedness has attracted a lot of attention in Washington. The Obama administration has taken a number of steps to lower student loan burdens on college grads, including by expanding programs that cap loan repayments as a share of income. President Obama also made tax credits for college attendance a centerpiece of his State of the Union Address.
The number of new home loans remains low but increased slightly to $355 billion in the fourth quarter, according to the New York Fed. At $8.17 trillion, mortgage debt is the biggest category of household debt.
Mortgage delinquencies ticked down from 3.2 percent of total loan balances to 3.1 percent. At the worst of the fallout from the housing crash in 2010, delinquencies were near 9 percent.
