According to a recent post in Liberty Street Economics, outstanding student loan debt jumped by $29 billion to $1.23 trillion nationwide as the number of delinquent loans remained somewhat steady in the last quarter of 2015. Although the authors are economists who work in the Federal Reserve Bank of New York’s Research and Statistics Group, their views do not necessarily reflect the position of the New York Fed or the Federal Reserve System. Nevertheless, their critical data speaks for itself.
The percentage of student loan borrowers who are 90 days or more delinquent in payments or are in default rose from 11.5 percent in the third quarter of 2015 to 11.6 percent in the fourth quarter ending Dec. 31.
By comparison, student loan debt for the same time period in 2014 increased by $31 billion to $1.16 trillion, with about 11.3 percent of aggregate student loan debt delinquent or in default.
As in previous years, the authors said the current delinquency and default rates are understated because up to half are "in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle."
"This implies that among loans in the repayment cycle delinquency rates are roughly twice as high,” the New York Fed economists said.
According to the New York Fed report, "The Graying of American Debt," debt for those between ages 50 and 80 increased by 59 percent in the 12 years between 2003 and 2015. Student loan debt balances for those in that age bracket increased 886 percent, or by $857. Using Equifax credit data, the authors found that debts from mortgages, home equity loans, car loans and credit cards for most older borrowers have remained relatively flat. However, student-loan debt has climbed, especially when compared to younger borrowers.
"Younger borrowers hold lower per capita balances in every debt category save student loans, and older borrowers hold higher per capita balances in every debt category save credit card debt," the researchers found. "Setting aside the influence of an aging population, it remains the case that in 2015, on average, younger borrowers held less non-student debt and older borrowers held substantially more debt of nearly all types, than comparably aged borrowers held in 2003."
Overall, student loan debt remains a vital issue on the political landscape, although most of the talk is about college costs and debt burdens on young borrowers. Unlike other kinds of debt, student loans cannot be released in bankruptcy. The federal government has the power to garnish wages and Social Security for payment, putting an increased number of older borrowers at risk for financial difficulties.
Earning a post-secondary degree or credential is no longer just a pathway to opportunity for a talented few; rather, it is a prerequisite for the growing jobs of the new economy. Over this decade, employment in jobs requiring education beyond a high school diploma will grow more rapidly than employment in jobs that do not; of the 30 fastest growing occupations, more than half require postsecondary education. With the average earnings of college graduates at a level that is twice as high as that of workers with only a high school diploma, higher education is now the clearest pathway into the middle class.
In higher education, the U.S. has been outpaced internationally. In 1990, the U.S. ranked first in the world in four-year degree attainment among 25-34 year olds; today, the U.S. ranks 12th. We also suffer from a college attainment gap, as high school graduates from the wealthiest families in our nation are almost certain to continue on to higher education, while just over half of our high school graduates in the poorest quarter of families attend college. And while more than half of college students graduate within six years, the completion rate for low-income students is around 25 percent.
Acknowledging these factors early in his Administration, President Obama has set a new goal for the country: that by 2020, America would once again have the highest proportion of college graduates in the world. To achieve this bold goal for college completion, ensure that America’s students and workers receive the education and training needed for the jobs of today and tomorrow, and provide greater security for the middle class, President Obama and his Administration are working to make college more accessible, affordable, and attainable for all American families.
Helping Middle Class Families Afford College
America is home to the best colleges and universities in the world — and increasing college attainment has never been more important to our economic competitiveness — yet tuition and fees have skyrocketed over the past decade, making it more difficult for American families to invest in a higher education for their future. Today’s college students borrow and rack up more debt than ever before. In 2010, graduates who took out loans left college owing an average of more than $26,000. Student loan debt has now surpassed credit card debt for the first time ever.
Our nation’s commitment to placing a good education within reach of all who are willing to work for it helped build a strong American middle class over the past several generations. In keeping this promise alive, President Obama has expanded federal support to help more students afford college, while calling for a shared responsibility in tackling rising college costs.
Strengthening Community Colleges
The President has also placed a strong emphasis on making America’s community colleges stronger, ensuring that they are gateways to economic prosperity and educational opportunities for millions of Americans each year. Each year, over 1,100 community colleges provide students and workers with critical skills. To help reach the President’s college attainment goal, the Obama Administration has called for a new partnership with states to ensure that the first two years of community college are free for responsible students, whether they are completing the first half of a bachelor’s degree or earning skills to go directly into the workforce.
In 2010, the President convened the first White House Summit on Community Colleges to focus on the important role these institutions play in our effort to increase the number of college graduates and prepare those graduates to lead the 21st century workforce.
Keeping Costs Down
In addition, the President is calling on Congress to advance new reforms to give more hard working students a fair shot at pursuing higher education, because education is not a luxury: it is an economic imperative that every hard working and responsible student should be able to afford. President Obama has emphasized that the federal government, states, colleges, and universities all have a role to play in making higher education more affordable, by reining in college costs, providing value for American families, and preparing students with a solid education to succeed in their careers.
In his State of the Union address, President Obama emphasized this shared responsibility of states and higher education institutions — working with the federal government — to promote access, affordability and attainment in higher education by reining in college costs, providing value for American families, and preparing students with a high quality education to succeed in their careers. It is not enough to increase federal student aid alone — state policymakers and individual colleges and universities bear a shared responsibility to take action against rising college tuition and costs.
Providing greater pathways for students to enter into and succeed in higher education is in the interest of all Americans, and is critical to developing a highly educated, highly skilled economy and workforce that will attract business and lead to lower unemployment.
Improving Transparency and Accountability
Finally, President Obama consistently strives to lead the most open, efficient and accountable government in history. In the vein of transparency and accountability, the President tasked his Administration with giving students and families new tools and relevant information that will help them make sound financial decisions in pursuing their higher education goals.
The Advocate of Affordable College is committed to covering the topics driven by the genuine interests of readers of this site. And we think that student loan debt is one of those topics.
(Greg Jarboe is the editor of The Advocate of Affordable College blog and the former editor of the Knowledge Transfer blog. He’s also the president and co-founder of SEO-PR, an instructor at the Rutgers Business School, the content marketing faculty chair at Market Motive, as well as the author of YouTube and Video Marketing: An Hour a Day.)