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Tuesday, May 27, 2014

'The Share of Borrowers with High Student Loan Balances is Rising'

We need to provide more support for education if we want it to be a vehicle for enhanced opportunity rather than a means of promoting existing inequities:

The Share of Borrowers with High Student Loan Balances is Rising, On the Economy, St. Louis Fed: It’s not just the total number of student loan borrowers that is going up. The average balance per borrower is going up as well. And, in particular, the fraction of borrowers with more than $10,000 in student debt is rising.

In a recent Economic Synopses essay, Alexander Monge-Naranjo, research officer and economist with the Federal Reserve Bank of St. Louis, examined the recent growth in student loan debt in the U.S. over the period 2005-2012. As of March 2012, student loan debt stood at $870 billion and had surpassed total credit card debt ($693 billion) and total auto loan debt ($730 billion).

In addition, Monge-Naranjo found that the distribution of student loans by debt levels had shifted, with the share of borrowers with loan balances in excess of $10,000 increasing. Increases were greater at higher levels of debt:

  • Only 3 percent of borrowers in 2005 owed more than $100,000. By 2012, that fraction reached 6.2 percent.
  • The share of borrowers who owed between $150,000 and $175,000 rose from 1.7 percent to 3.7 percent.
  • The share who owed between $175,000 and $200,000 went up from 0.6 percent to 1.5 percent.
  • The share of those owing more than $200,000 went up from 0.2 percent to 0.6 percent.

While Monge-Naranjo noted that “high levels of student loan debt pose no problems as long as the investment in education has high returns and the loans are repaid,” he also indicated that some borrowers may suffer adverse effects in the future, such as difficulty obtaining other forms of credit.

    Posted by on Tuesday, May 27, 2014 at 09:03 AM in Economics, Income Distribution, Universities | Permalink  Comments (43)

          


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