Serious Student Loan Delinquencies Remain High

In Paying for College on Mar 28, 2016

The Federal Reserve Bank of New York reported that 11.5 percent of student loan debt was seriously delinquent as of Q4 of 2015. This is not much different than in Q4 of 2012, when 11.7 percent of student loan debt was seriously delinquent.

A serious delinquency occurs when the loan is 90 or more days late.

Student loan delinquency rates are expressed relative to all student loans outstanding. Since about half of aggregate student loan debt is in deferment, forbearance or a grace period, the real delinquency rate may be twice as high.

All other types of consumer debt, including credit cards, mortgages and auto loans, have demonstrated significant declines in the serious delinquency rate since the peak in 2010. Student loans did not experience a spike in the serious delinquency rate until late 2012. The serious delinquency rate for student loans has remained relatively flat since then.

A possible explanation is the delayed impact of the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA), which provided parent borrowers with the option of deferring the repayment of Federal Parent PLUS loans while the student was still in school. Before ECASLA, Federal Parent PLUS loans entered repayment within 60 days of full disbursement.

Another contributing factor might involve the age of the consumer panel used to sample credit reporting agency data. The consumer panel tends to be a little older than the student and parent population, the equivalent of sampling education debt from a year or two prior.

Nevertheless, this does not explain why the serious delinquency rate for student loans has not yet started decreasing due to the improving economy.

The serious delinquency rate is shown in this chart.

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