Student loan payments swamp borrowers

June 1, 2015 / JILLIAN BERMAN

An improving job market still isn’t enough to help struggling borrowers pay back their student loans.

In the first three months of 2015, 11.1% of student loan borrowers were at least 90 days behind on their payments, according to data from the New York Federal Reserve released Tuesday. While that’s slightly less than the 11.3% who were seriously delinquent during the last quarter of 2014, the authors note that the report likely underestimates the true level of borrowers delinquent on their student loans.

Federal Reserve Bank of New York
The share of student loan borrowers, who are behind on their payments and not in a grace period or program that allows them to postpone their payments, doesn’t fit on this chart.
That’s because the delinquency rate is the share of all borrowers with student debt, who are behind on their payments. But about half of those people aren’t currently required to make payments either because they’re in some kind of a grace period or they’re in a program that allows them to postpone their payments. This suggests that the delinquency rate of those borrowers actually required to make payments on their student loans is about twice as high, the N.Y. Fed researchers wrote in a footnote to the report.

Nearly one-third of student loan borrowers, who are required to make payments, are one month behind on their payments, according to data from the St. Louis Federal Reserve, reported by The Wall Street Journal last month.
The New York Fed figures suggest that the $1.19 trillion in outstanding student loan debt, which is up $78 billion from last year, is still weighing on borrowers, even several years after the Great Recession. That albatross is likely preventing borrowers from buying houses, cars and saving, behavior that could hamper economic growth.

If trends continue, low-income borrowers will struggle the most to pay back their loans. More than half of borrowers who left school in 2009 and were living in households earning an annual income of less than $40,000 when they took out their student loans were behind on their payments or in default within five years of leaving school, according to a separate New York Fed report released last month.

That’s compared to just 20% of borrowers who left school in 2009 and came from households earning $80,000 a year or more.

 

This article was originally published here: http://www.marketwatch.com/story/student-loan-payments-swamp-borrowers-2015-05-12?siteid=yhoof2