More than half of student loan accounts are delaying payments on their principal and interest, contributing to rising balances for recent graduates who face a weak jobs market, according to a new study.
"With unemployment rates remaining high, the repayment of these loans remains a concern," said Ezra Becker, vice president of research and consulting for Chicago-based Transunion, which conducted the study. "Students can defer their loans for only a certain period, often up to three years, and after that these students can find themselves in a difficult position financially."
Nor can bankruptcy court provide much relief, as student loans are rarely dischargeable. So graduates have to either begin paying or ask for forbearance, which buys them more time.
The average debt per borrower has increased by 30 percent since 2007, to $23,829, Transunion said.
Transunion, one of three major credit-reporting agencies, estimates that 65.5 million of 128.8 million student loans outstanding as of last March are deferring payments. The credit bureau examined every active student loan in its credit database from March 2007 to March 2012. It segmented them as being either in repayment or deferred status. It didn't double count loans that had co-signors.
The balance of loans that are in deferred status -- where the repayment of principal and interest is temporarily delayed -- represented $388 billion of $893 billion in student debt outstanding. That's up from $228 billion in 2007. Transunion said "virtually every student lender," including the U.S. government, which makes more than 90 percent of student loans, reports its data to the company.
The U.S. Consumer Financial Protection Bureau estimated last October that student debt now surpasses $1 trillion, but, in November, the Federal Reserve Bank of New York, long a source on student loan data, said outstanding student loan balances were $956 billion as of Sept. 30, 2012.
Transunion's finding that about half of student loan payments are being deferred is consistent with findings from the New York Fed.
The percent of student loan balances 90 or more days delinquent stands at 11. That's higher than most other credit products, including mortgages, home equity lines of credit, credit cards and auto loans.
"These delinquency rates for student loans are likely to understate actual delinquency rates because almost half of these loans are currently in deferment or in grace periods and therefore temporarily not" considered delinquent, the New York Fed said in November. That implies that delinquency rates could exceed 20 percent, the Fed said.
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