Friday, March 27, 2015

Student loan delinquency is higher than for other borrowing

Click here to read the article. Excerpts:
"Student loans had a higher delinquency rate than credit cards, auto loans and home mortgages over the past three years, the Federal Reserve Bank of New York reported recently.

Outstanding student loans in the country have reached $1.16 trillion, an increase of $77 billion from a year ago. About 11.3 percent were in default – more than 90 days delinquent – in the last quarter of 2014, compared with 11.1 percent in the previous quarter.

By comparison, 3.5 percent of car loans were past due, as were just 3.1 percent of mortgage loans."

"Outstanding household debt increased to $11.83 trillion, a 1 percent rise over the previous quarter. Home mortgages and student loans, which increased by $39 billion and $31 billion, respectively, are the biggest contributors to the rise in debt.

The student loan delinquency rate – payments missed for fewer than 90 days – may be much bigger than the default rate shown in the report. An earlier report by the New York Fed said the delinquency rate for student loans was 21 percent in 2012."

"During the recent financial crisis, Americans reduced other debts but they continued education financing, according to the New York Fed.

“I’m not that surprised, too much, about the findings,” said Mike Branch, a certificated financial planner at Focus Financial, based in Minneapolis.

He does college-planning workshops for parents of high school students.

“Schools are selling kids the idea of student loans,” Branch said. “They tell those young students, particularly teenagers still at high schools, not to worry too much about the money because they can borrow. But those kids really have no idea what it takes to pay those loans back, and how much money they’ll have to make, and how that’s going to affect their lives after college.”"

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