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Student Loan Debt: Worse than We Thought

Consumer debt peaked in 2008.  And over the past four years, it has been falling.  Since the start of the financial crisis, overall household debt has fallen 18%.  But according to a new report from the New York Federal Reserve, there is one glaring exception: student loan debt.  While household debt has fallen, student loans have grown 56% (according to The Wall Street Journal).

And now student loan debt has eclipsed credit cards and auto loans…and it’s the largest form of debt outside of mortgages.

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Source: Federal Reserve Bank of New York

Not only is student loan debt one of the largest forms of debt…it’s also the most troubled.  Last quarter, for the first time on record, student debt surpassed all other types with the highest delinquency rate among US consumer loans.

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Outstanding student loan debt stands at $956 billion today.  And 11% of student loan balances are over 90 days delinquent.  But that 11% doesn’t include loans that are in forbearance or a grace period – meaning the delinquency rate is likely much higher.

And the thing to remember here is that while there are lending standards for credit cards, mortgages and auto loans, the federal government holds 85% of outstanding student debt, and with the goal of giving everyone an opportunity, will give a loan to pretty much anyone…regardless of their ability to repay it.

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