Smart Borrower Blog

Student Loan Debt Jumped in Third Quarter

Dec 5th, 2012 @ 9:29 PM by Amber Nelson

Even as total household debt fell, the amount of student loan debt increased more than any other kinds of debt or credit in the third quarter of this year, according to new data from the Federal Reserve Bank of New York.

Total consumer debt fell to $11.31 trillion, down 0.7 percent from the second quarter. The decrease was due mostly to a $120 billion drop in mortgage debt and a $16 billion decline in home equity lines of credit. Those decreases not only account for people paying off their loans, but also for default loans that are written off as well as simply a drop in the amount of mortgage money consumers are borrowing.

When mortgage data is taken out of the picture, consumer debt actually increased by 2.3 percent in the third quarter, with non-real estate household debt climbing to $2.7 trillion. Americans spent $2 billion more on their credit cards and $18 billion more on car loans than in the second quarter. By far the largest jump, however, was in student loans. Student debt rose $42 billion in the latest quarter up to $956 billion. About $23 billion of the increase is current debt and the rest is “attributed to previously defaulted student loans that have been updated on credit reports this quarter,” the New York Fed wrote. The delinquency rate on student loans that are behind by 90 days or more rose to 11 percent.

Taken all together, the New York Fed believes the consumer debt numbers are positive.

“The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position,” said Donghoon Lee, senior economist at the New York Fed in a statement.  “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”


About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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