Report Estimates Student Loan Delinquency Rate at 21% of Student Loan Borrowers

The student loan delinquency rate may be much higher than previously estimated, according to a report by the Federal Reserve Bank of New York (FRBNY). The report estimates that the delinquency rate is not a previously estimated 10 percent, but actually 21 percent.

As of the third quarter of 2011, FRBNY estimates that of the 37 million borrowers who have outstanding student loan balances, 14.4 percent (5.4 million) have at least one past due student loan account. FRBNY notes that these past due balances total $85 billion and constitute roughly 10 percent of the total $870 billion in student loan debt. The 10 percent past due rate for students loans is comparable to past due rates for other industries, such as mortgage, credit and auto loans.

"Does this mean that the prospects for student loan delinquencies are similar to those for the household debt in general, and thus no special attention is warranted? Unfortunately, this is not the case - some special accounting used for student loans, not applicable to other types of consumer debt, makes it likely that the delinquency rates for student loans are understated," the FRBNY report states.

Today federally backed loans represent a majority of total lending, and those loans offer benefits that allow undergraduates to defer until the student graduates from school as well as provide a six-month post-graduation grace period. These deferred student loans are not included in the past due balance, but are included in the total balance from which the delinquency rate is derived. According to the FRBNY, after adjusting the past due rate calculation to exclude borrowers in grace periods and forbearance, the delinquency rate is 21 percent, compared to the unadjusted original rate of 10 percent.

"In sum, student loan debt is not just a concern for the young," the report states. "Parents and the federal government shoulder a substantial part of the postsecondary education bill. Moreover, the student loan delinquency picture is not fully captured in the broad statistics since a significant proportion of borrowers and balances are not yet in the repayment cycle."

Share of Population With Student Loan Debt by Age

The FRBNY report also shows that the younger you are, the more likely you are to have peers with student loan debt.

  • 40.1 percent of people under 30 years old have outstanding student loan debt
  • 25.1 percent of people between the ages of 30 and 39 have outstanding student loan debt
  • 7.4 percent of people who are 40 years old and older have outstanding student loan debt

As a result, $580 billion of the total $870 billion in student loan debt is owed by people younger than 40.

Outstanding Student Debt Loads 

FRBNY estimates that the average outstanding student loan balance per borrower is $23,300. The data indicate that a small fraction of people have balances significantly higher than the median. 

  • About 25 percent of borrowers owe more than $28,000; 
  • About 10 percent of borrowers owe more than $54,000; 
  • About 3.1 percent of borrowers owe more than $100,000; and 
  • About 0.45 percent of borrowers, or 167,000 people, owe more than $200,000.

The distribution also varies by age group, FRBNY reports. Borrowers between the ages of 30 and 39 have the highest average outstanding student loan balance, at $28,500, followed by borrowers between the ages of 40 and 49, whose average outstanding balance is $26,000.


Publication Date: 3/15/2012

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