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Student-Loan Delinquencies Now Surpass Credit Cards

Written by: James Mash

Even as the U.S. economy shows some signs of improvement, there are still many Americans who are lagging behind when it comes to meeting their student-loan repayments. According to recent figures released by the New York Federal Reserve Bank, there is a big proportion of student loan balances in delinquency. Most of these student loans have been unpaid for 3 months or more. This recent development shows that in the 3rd quarter, student loans surpassed credit-card balances for the first time.

The percentage of delinquent student loans/debt outstanding rose to 11 percent up from 9% recorded in the second quarter. This simply means that out of the total $956 billion student-loan debt outstanding at the end of the third quarter (September), $105billion was delinquent. By comparison, the delinquency rates on home-equity credit lines, mortgages and auto loans stood at 4.9 percent, 5.9 percent and 4.3 percent respectively at the end of the third quarter.

After the release of these student loan debt figures, student-loan debt has officially taken the crown as the debt that is most prone to delinquency in America. Since the first release of the New York Federal Reserve data back in 2003, the percentage of delinquent student debt has almost doubled. The initial percentage of delinquent student debt in 2003 stood at 6.13 percent. Unlike student loan delinquency, Credit-card debt delinquency has lowered since reaching its peak (13.74%) in mid-2010.

The main problem created by student debt delinquency is that this debt is footed mostly by the taxpayer which is not the case with credit card debt. Private sector lenders and Banks foot the biggest chunk of credit card debt in cases of delinquency. The fact that the student-debt keeps piling is also a problem. After surpassing the total credit card debt in mid- 2010, the outstanding student loan debt amount has quickly risen to become 42% larger than the total outstanding credit card debt ($674 Billion) as at the end of the third quarter.

Moreover, it is important to note that the actual student loan delinquency rate is way higher than the official rate suggested. According to the New York Federal Reserve Bank, the student loans delinquency rates are likely to be understated due to the fact that approximately 50 percent of these loans are in deferment currently. This simply means that these loans are in forbearance or in grace period thus they are temporarily not repayable.

In simple terms the accurate delinquency rate for student loans that are currently in the repayment cycle is approximately twice as high which put the actual student loan delinquency rate at 21 percent. This is an extremely high figure that begs for stun action i.e. for an overhaul of this important market. This however puts the taxpayers’ dollars at great risk.

The problem of student loan delinquency is real. Students with problems repaying their student loans should pursue all possible alternative i.e. seeking loan consolidation services from credible loan consolidators like us;

Our job is to simplify student’s finances by combining federal student loans into a single loan that has one low/affordable monthly payment. You shouldn’t default your student loan for any reason. Or when you do, you shouldn’t despair. We will help you get your student loan out of default. We will also help you prevent or stop tax offset and wage garnishment. We will help you understand student loans defaults better. The current student loan delinquency statistics are shocking. If you have problems meeting your student loan repayments or want to get out of default, contact us today.

The consequences of a student loan default are dire. For instance, your entire unpaid student loan balance plus interest becomes immediately due once you default. This increases your student loan amount significantly because a default also attracts additional fees i.e. late fees. You also lose your eligibility for a repayment plan, forbearance, deferment or federal student aid.

When you default on your student loan, you also damage your credit rating because the delinquent loan is reported to credit bureaus. This has a huge impact on your ability to take additional debt i.e. a car loan or a mortgage e.t.c. The federal government also has the right to withhold your salary through your employer in a process called wage garnishment. This among many other problems caused by student loan default can be avoided. To avoid facing such problems, contact The Student Loan Help Center. We can fix default student loans by offering you suitable options.


Student-Loan Delinquencies Now Surpass Credit Cards