There’s some good news and bad news about the state of Americans’ finances embedded in the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, according to a Bloomberg News commentary. First, the good news: 95.6 percent of households were current on their debt payments as of the second quarter, whether that’s mortgages, student or automobile loans or credit card bills. That’s the largest share since the third quarter of 2006, which of course was well before the financial crisis and the start of the last recession. It’s a sign that many individuals and families are continuing to benefit from this record-long recovery and have the resources to make timely payments on what they owe. The bad news is that the share of households deemed “severely derogatory” on payments isn’t going away like it was 13 years ago. The category, which the New York Fed defines as “any stage of delinquency paired with a repossession, foreclosure, or ‘charge off,’” is hovering at 2 percent, the same level it’s been at since the second quarter of 2015. As the bank’s researchers noted in a blog post, severely derogatory balances now make up almost half of all delinquencies, the largest share ever in data going back to 2003. Of the roughly $250 billion severely derogatory outstanding balance, defaulted student loans make up 35 percent, the report found. That’s a new phenomenon: For years, student loans barely registered compared with mortgages and credit cards. But, as the researchers noted, the U.S. housing crisis is in the rear-view mirror and the foreclosure pipeline has cleared out pretty much everywhere across the country. On the other hand, defaults on student debt “have grown stunningly since 2012,” they said. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy.
