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Ny Fed 27% Borrowers Late Student Loans

Ny Fed 27% Borrowers Late Student Loans

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Published by buckybad2
NY Fed data shows 27% of borrowers are late on their student loan debt @ 3Q2011
NY Fed data shows 27% of borrowers are late on their student loan debt @ 3Q2011

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Published by: buckybad2 on Mar 26, 2012
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http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.htmlGrading Student Loans
Meta Brown 
Andrew Haughwout 
Donghoon Lee 
, Maricar Mabutas,* and 
Wilbert van der Klaauw 
 Student loans support the education of millions of students nationwide, yet much is unknown about the student loan market.Relevant data are limited and, for the most part, anecdotal. Also, sources tend to focus on recent college graduates and do notreveal much information about the indebtedness of parents, graduate students, and those who drop out of school.To inform the public and policymakers, we devote this post to some new findings obtained from the FRBNY Consumer CreditPanel, a unique and nationally representative
data set
sourced from Equifax credit reports. The FRBNY Consumer Credit Panelhas made possible our
Quarterly Report on Household Debt and Credit 
, first issued in the second quarter of 2010. We willexamine the overall student loan debt market as of third-quarter 2011, giving particular attention to changes from the second tothe third quarter and highlighting new findings by age group as well.The outstanding student loan balance now stands at about $870 billion,
surpassing the total credit card balance ($693 billion) andthe total auto loan balance ($730 billion). With college enrollments increasing and the costs of attendance rising, this balance isexpected to continue its upward trend. Further, unlike other types of household debt such as credit cards and auto loans, thestudent loan market is incredibly complex. Numerous players and institutions hold stakes at each level of the market, includingfederal and state governments, colleges and universities, financial institutions, students and their families, and numerous servicersand guarantee facilitators.Student loans have received considerable media attention in recent months as researchers and policymakers voice growingconcern about the heavy debt loads assumed by students and their parents. In addition to worries about the volume ofoutstanding student debt, there is concern about having enough federal aid to support the large number of students taking uppostsecondary education. Federal and state governments are deeply involved in the student loan market, either directly originatingstudent loans or indirectly guaranteeing them. The
Health Care and Education Reconciliation Act
, signed into law last year,ended private lending of federally subsidized loans, approved expansion of Pell Grants, and appropriated funds to invest ininstitutions that serve minority and low-income populations. Still, advocates for students clamor for more to be done to increasethe availability of student loans. Further, state budget cutbacks to higher education amid tight fiscal circumstances may result inhigher tuition.In October 2011, President Obama announced
executive actions
to cap monthly federal student loan repayment at 10 percent ofdiscretionary income for college graduates, eased from the previous 15 percent. This cap comes as some relief to those whoworry about how they will pay back their debt. Moreover, student loan debts are typically shouldered by recent college graduatesand other young workers, who tend to face lower incomes and higher rates of unemployment than older cohorts.From the second to the third quarter of 2011, the total outstanding student loan balance grew 2.1 percent, from $852 billion to$870 billion. Over the same time period, other types of consumer debt declined or remained flat. Of the 241 million people in theUnited States who have a credit report with Equifax, our data provider, about 15.4 percent—or 37 million—hold outstanding
student loan debt. The student loan debt, however, is not evenly distributed across the general population. Among people underthirty years old, 40.1 percent have outstanding student loan debt. Among people between the ages of thirty and thirty-nine, 25.1percent have outstanding student loan debt. In contrast, only 7.4 percent of people who are at least forty years old haveoutstanding student loan debt. As a result, $580 billion of the total $870 billion in student loan debt is owed by people youngerthan forty (see charts below).
 The average outstanding student loan balance per borrower is $23,300. Again, there is substantial heterogeneity in balances ofindividual borrowers. The median balance of $12,800 is roughly half the average level, which indicates that a small fraction ofpeople have balances significantly higher than the median. About one-quarter of borrowers owe more than $28,000; about 10percent of borrowers owe more than $54,000. The proportion of borrowers who owe more than $100,000 is 3.1 percent, and 0.45percent of borrowers, or 167,000 people, owe more than $200,000. The distribution also varies by age group: for example,borrowers between the ages of thirty and thirty-nine have the highest average outstanding student loan balance, at $28,500,followed by borrowers between the ages of forty and forty-nine, whose average outstanding balance is $26,000 (see chart below).

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