The total household debt for American families grew by nearly $150 billion, surpassing a previous peak during the Great Recession in 2008, according to a new report from the Federal Reserve Bank of New York (NY Fed).
The report, published Wednesday, found that total household debt increased by 1.2 percent during the first quarter of 2017 to $12.73 trillion, up from the previous record high of $12.68 trillion. Over the past several years, student loan debt has become a larger portion of total household debt, while other types of debt, such as mortgages, have declined in their share of total household debt. In fact, student loan balances have increased in every year for the past 18 years that the NY Fed has published this series on household debt. In 2008, student loan debt made up 4.8 percent of total household debt, but the most recent report shows student loan debt now makes up 10.6 percent of total indebtedness.
“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today. This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance,” said Donghoon Lee, research officer at the New York Fed, in a statement. “While most delinquency flows have improved markedly since the Great Recession and remain low overall, there are divergent trends among debt types. Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high.”
Overall, student loan debt increased by $34 billion during the most recent quarter, and by $83 billion in the last year, for a total of $1.34 trillion. The rate for serious delinquencies on student loan debt — those more than 90 days past due — decreased slightly (0.2 percent) over the last quarter, but remain high. The NY Fed also noted that delinquency rates for student loans are likely understated because many loans are currently in deferment, in a grace period, or in forbearance. Researchers within the NY Fed have noted that delinquency rates are twice as high.
But there’s also been an increase in student loans moving into serious delinquency, which the NY Fed defined as those that had newly become 90 or more days delinquent in the current quarter, divided by those that were not delinquent in the previous quarter. Notably, the movement into serious delinquency for all loan types except for student loans generally declined since the Great Recession and are currently lower than their previous peaks.
“More recently, performance on mortgages has continued to improve, while auto loan delinquency flows have been trending upward since 2012. Credit card transitions have also ticked up,” researchers wrote in an accompanying blog post. “The standout, however, has been student loans — with new serious delinquency flows that deteriorated steadily between 2004 and 2014 and have remained stubbornly high since then.”
Publication Date: 5/18/2017