A new report from the Federal Reserve Bank of New York shows that student loan delinquency rates have skyrocketed to their highest level in 21 years, with 12.9% of loans entering serious delinquency after a moratorium on repayment ended.
The moratorium, which was initially put in place in 2020 during the pandemic, allowed borrowers to temporarily pause their payments. However, as the pause came to an end and reporting of missed payments resumed, delinquencies began to rise sharply. In the second quarter of this year, 10.2% of aggregate student loan debt was 90 or more days delinquent, a figure that is slightly below pre-pandemic levels.
The age group most affected by delinquency rates is borrowers aged 50 and above, with a rate of 18%. The younger cohorts saw significantly lower rates, with those aged 30-39 having an 11% delinquency rate and those aged 18-29 having an 8% rate.
The rise in student loan delinquencies comes as credit card debt rose by $27 billion to $1.21 trillion, while auto loan borrowing increased by $13 billion to $1.66 trillion. Experts say that the restart of federal repayment has had a significant impact on borrowers, and it is expected to continue growing.
“The impact of the federal repayment restart continues to grow, and it has been substantial,” said Matt Schulz, a LendingTree chief consumer finance analyst.
Source: https://www.foxbusiness.com/economy/student-loan-delinquency-rates-highest-21-years-covid-moratorium-fades-away