According to the New York Federal Reserve, the student loan delinquency rate has fallen to 9% from 11% in 2013.
Student loan debt is overdue at a higher rate than any other type of consumer debt but it’s getting better, according to new data from the New York Federal Reserve. Almost 9 percent of student loans were overdue by 30 days or more, which is a drop from 11 percent in 2013. This is likely due to an improved economy and more jobs being available to borrowers after graduation, the Financial Times reported.
However, at over $1.5 trillion, outstanding student loan debt is still a major concern in the U.S. Consumers owe more on student loan debt than both outstanding credit card debt and auto loans. And the delinquency rate for student loan debt is higher than for credit card debt.
The strong economy has lessened this burden for many borrowers; unemployment rates for individuals with a bachelor’s degree or higher is just over 2 percent. Wilbert van der Klaauw, senior vice president at the New York Federal Reserve, told the Financial Times that lower student loan delinquency rates reflect “an improved labor market and increased participation in various income-driven repayment plans.”
Data has shown that outstanding student loan debt makes it difficult for many borrowers to buy a home or start a family. And this debt often hits low-income Americans the hardest.
Borrowers who owe less than $5,000 are more likely to default within four years than individuals with higher amounts of student loan debt, according to the Urban Institute. Although these borrowers have less debt overall, they often find that the programs they enrolled in did little to improve their job prospects.
For-profit schools are a prominent factor in this issue, the Urban Institute’s research showed. In the past few years, for-profit schools have become a central tenet in the student loan debt crisis. These schools are run like any other business; their main goal is to earn a profit for their shareholders.
These types of schools tend to cater to low-income borrowers. The schools usually offer more flexible schedules so students who work full-time can attend classes, and they usually offer certificate programs or quicker paths to earning a degree.
Yet the highly-publicized closings of for-profit chains like ITT Technical and Corinthian Colleges left thousands of students in the lurch with no degree to show for it – and student loan debt that might remain unpaid.
As a result, consumer guidelines on the for-profit industry had been tightened considerably, but those rules are currently being reconsidered by the Department of Education.