Borrowers Fall Further Behind on $1.3 Trillion in Student Loans

Paying a Heavy Price for a Higher Education

Borrowers are having more trouble paying their student loans, even as the job market recovers and consumers improve their mortgage payment histories.

About 11.5 percent of student debt was delinquent or in default for at least 90 days in the quarter that ended in June, up from 11.1 percent in the previous three months, according to data released today by the Federal Reserve Bank of New York. Credit-card delinquencies held steady, at 8.4 percent.

The fresh information signals that the burden of the nation’s $1.3 trillion in education loans, primarily from the federal government, continues to trouble the economy. Student loans are becoming an issue in the presidential campaign, with candidates offering plans to ease the burden. The Congressional Budget Office estimates the amount borrowed will double by 2025.

The challenge may be even worse than reported. That’s because half the loans are in programs, such as deferment, that allow borrowers to put off payments, Federal Reserve economists said in the report. For those loans, the delinquency rate could be twice as high, they said. The Fed analyzes a sample of data, including government and private loans, provided by the Equifax Inc. credit bureau.

Delinquency rates have improved for other kinds of debt, such as mortgages, because of tough underwriting standards, according to Joelle Scally, administrator of the New York Fed’s Center for Microeconomic Data. By contrast, the government doesn’t consider students’ credit histories, so they the debt flows to “a more diverse group of borrowers,” Scally said in an e-mail.

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