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Student Loan Delinquency Reached $85 Billion in Third Quarter

About $85 billion in U.S. student loan debt, or 10 percent of the outstanding balance, was delinquent in the third quarter of 2011.

Of the 37 million borrowers who have student-loan balances, 14 percent, or about 5.4 million people, have at least one past due student-loan account, according to a report posted today on the Federal Reserve Bank of New York’s website.

As many as 47 percent of student-loan borrowers “appear to be in deferral or forbearance,” and didn’t have to make payments as of the third quarter, according to the report. The district bank reported last week that debt from educational loans in the fourth quarter was $867 billion, higher than credit-card debt, according to a survey of consumer credit. Special attention should be paid to these student-loan delinquencies compared with other household debt, the authors wrote.

“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,” wrote the economists, Meta Brown, Andrew Haughwout, Donghoon Lee, Maricar Mabutas and Wilbert van der Klaauw.

Students with federally backed loans are allowed a six- month grace period after they graduate and aren’t required to begin paying their loans in that time. Borrowers with unsubsidized federal loans can also defer payments when in school, and interest accrues.

Borrowers who are temporarily exempt from making payments were excluded from the report. As a group, these people owed as much as or more in the third quarter than in the second, according to the report.

Student-loan debt isn’t just a concern for the young, the authors wrote.

‘Not Fully Captured’

“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,” they wrote.

The average outstanding student-loan balance per person is $23,300, according to the report. A third of the borrowers are under the age of 30.

The $867 billion comprises both federally backed loans and private borrowing. While the majority of loans are taken by students, parents also incur debt in their own names to pay for children’s college costs.

The New York Fed’s data is from a random sample of people with a social security number, typically 19 years or older, provided by the Equifax Inc. (EFX) credit bureau.

In August, the New York Fed reported outstanding student loan debt at $550 billion and later revised the number to $845 billion. The bank is adjusting historical figures because of technical issues in how it used to obtain student-loan data, according to a November report.

To contact the reporter on this story: Janet Lorin in New York jlorin@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net

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