The Great Recession has forced consumers to change their spending habits. Personal finance experts have long warned that Americans were carrying far more credit card debt than was financially responsible. Perhaps the country was listening; most debt is declining. But it appears Americans are also taking on more education debt.
According to an article by Katy Hopkins in U.S. News & World Report:
In its “Quarterly Report on Household Debt and Credit,” the New York Fed found that education debt totaled $914 billion as of June 30—up $10 billion from March 31. Unlike student loan debt, the amount owed on some other forms of debt, such as mortgages and home equity lines of credit, has decreased.
“Since the peak in household debt in [the third quarter of 2008], student loan has increased by $303 billion, while other forms of debt fell a combined $1.6 trillion,” the report notes.
The report also noted that 8.92 percent of student loan borrowers were 90 days late on their payments or more. In March 8.69 percent of borrowers were delinquent.
The report didn’t speculate on the reason for the increase in student loan debt, though it doesn’t seem terribly surprising. Households can reduce many expenses by simply not buying things. They can be more prudent with mortgages and home equity lines of credit. Student loan debt, however, is a little more complicated. Households might actually be inclined to take out more education debt when they reduce other expenses, because many colleges and states are reducing financial aid awards and Americans have been told for years that student loans are good debt.
That doesn’t, of course, make it any easier to make payment on student loans when the economy is bad.