Student Loans | Leeds on Finance

Before I get to today?s topic, a reader sent me a link that you might enjoy.? If you go to this site, you can hit the play button and watch how employment changes over the years (by area).? I found it interesting.? Here?s the link.? Now, on to today?s blog?

Several New York Fed economists (Meta Brown, Andrew Haughwout, Donhoon Lee, Maricar Mabutas and Wilbert van der Klaauw) wrote a short blog / article, titled ?Grading Student Loans.?? Here?s the link.? (At the link, you will find charts that display the numbers I?m repeating here.)? Here are some of their key findings (this is lifted almost verbatim ? so it?s their work and not mine):

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1. Student loan balances are approximately $870 billion.? This is greater than credit card debt ($693 billion) and auto loans ($730 billion).

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2. This debt is likely to continue to rise as enrollments increase, costs increase (especially as state funding drops), employment of recent graduates is weak and incomes are stagnant.? (Other than that, it?s a great time to be in college.)

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3. From Q2 to Q3 (2011), the total outstanding student loan balance grew 2.1%.? Over the same time period, other types of consumer debt declined or remained flat.

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4. Of the 241 million people in the US who have a credit report with Equifax, 15.4% (37 million) have outstanding student loan debt.

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5. Among people under thirty years old, 40.1% have student loan debt.? Among people between the ages of thirty and thirty-nine, 25.1% have outstanding student loan debt.

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6. The result is that $580 billion of the total $870 billion in student loan debt is owed by people younger than forty.

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7. The average outstanding student loan balance is $23,300.? The median is $12,800.? That means that a small number of people have A LOT of student debt.

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8. About one-quarter of borrowers owe ore than $28K; about 10% owe more than $54K.? Approximately 3.1% owe more than $100K and .45% (167,000 people) owe more than $200K.

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9. Borrowers between the ages of 30 and 39 have the highest average outstanding loan balance ($28.5K), followed by borrowers between the ages of 40 and 49 ($26K).

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10. Of the 37 million borrowers who have outstanding student loan balances in Q3, 14.4% (5.4 million borrowers) have at least one past due student loan amount.? This adds up to $85 billion (10% of the outstanding balance).? At first glance, this rate is no different than household debt, credit cards and auto loans.

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11. The student loan delinquency rate is understated.? The majority of loans are federally backed and repayment is deferred until graduation (and then can be pushed back another six months).? This is why only 12.6% of borrowers under 30 are delinquent compared with 16.8% between the ages of 30 and 39.

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12. The researchers tried to eliminate individuals who (they believe) are currently exempt from making payments.? As many as 47% appear to be in deferral or forbearance periods.? (Without examining the numbers, this sounds high to me.)? This is 17.6% of borrowers who had the same balance in Q3 as Q2 and 29.1% who increased their overall student loan balance by taking on new originations or accruing interest to the balance.

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13. Excluding those who are currently exempt from payments, 27% have past due balances (higher than the 14%).

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14. The adjusted proportion of student loan balances that is delinquent is 21% (much higher than the 10% stated).

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Source: http://leedsonfinance.com/2012/03/06/student-loans/

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