fedgazette Roundup (2011-2015)

Growth in student debt slows, but will it last?

Richard M. Todd | Vice President and Advisor to the CICD

Published June 6, 2014

For much of the past decade, student debt has grown rapidly on two margins—the share of consumers affected and the amount owed by each debtor—and has generated considerable concern over the attendant pressure on household budgets and rise in delinquencies. But growth in both measures has slowed recently in the Ninth District.

In the Ninth District in early 2005, about 15 percent of consumer credit files included some form of student debt, with a median balance owed of about $7,000, according to the Federal Reserve Bank of New York/Equifax Consumer Credit Panel. By early 2011, the share of district files with student debt grew to over 20 percent and the median balance owed by those with student debt rose to over $11,750. The prevalence and median balance for most other forms of consumer debt grew much more moderately or even contracted over the same period (see Figures 1a and 1b).

Student debt ch1-2 6-5-14

However, since 2011, the two measures of student debt are no longer growing rapidly in tandem. Growth in the share of district residents with student debt slowed first. This share grew by just 0.2 percentage points per year between the first quarter of 2011 and the first quarter of 2014, compared with 0.9 percentage points per year between the first quarters of 2005 and 2011. The median student loan balance among district residents with student debt climbed rapidly until more recently, rising by 6 percent from early 2011 to early 2012 and by a further 9 percent by early 2013. However, it has been nearly flat since, rising just 0.2 percent from the first quarter of 2013 to the first quarter of 2014.

It is premature to say that the period of rapid growth in student debt is over. As seen in Figure 2, both measures are volatile from quarter to quarter and even year to year. For example, although generally slow since 2011, growth in the share of district residents with student debt rebounded after a dip in 2012, and by late 2013 this share reached 21 percent for the first time. Still, for those concerned about the burden of student debt, these recent data show at least a pause in its previous rapid, two-edged pace of growth.

For further details on student debt and general consumer credit conditions in the Ninth District and the nation, see the Consumer Credit Conditions web page.

Student debt Ch3-- 6-5-14