Student Loans Go Unpaid, Burden U.S. Economy: Chart of the Day

Borrowing for education will have “potentially lasting effects” on U.S. demand for houses, cars and other big-ticket items, according to Steven C. Wieting, Citigroup Inc.’s director of economic and market analysis.

As the CHART OF THE DAY depicts, student loans surpassed credit cards last quarter to show the highest delinquency rate among U.S. consumer debt. The shift was chronicled in a report published two days ago by the Federal Reserve Bank of New York.

“Student-loan debt crowds out other consumption,” Wieting wrote yesterday in a report. The New York-based economist cited a Rutgers University study, done in May, that showed 40 percent of college graduates from 2006 through 2011 postponed a major purchase because of their debt burdens.

Payments on 11 percent of educational loans were at least 90 days behind last quarter, the New York Fed’s report showed. The rate was the highest of five categories tracked by the bank, using data compiled by Equifax Inc., a credit-rating company. Credit-card delinquencies ranked second at 10.5 percent.

The rate for student debt may be understated because about half the loans aren’t currently due for repayment, according to the New York Fed. The figure reflects grace periods, deferments and forbearance, or temporary suspensions.

Student loans are a growing burden on younger Americans, whose pay is dropping as the cost of education rises, Wieting wrote. Average earnings fell at a 1.6 percent annual rate for 25- to 34-year-olds with a bachelor’s degree and a full-time job from 2000 to 2010, according to government data cited in the report. Tuition and fees at four-year public colleges and universities climbed 5.6 percent annually in the same period.

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