The fear is that growing debt from student loans — as well as auto loans
and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago.
Auto loans totaled about $1.1 trillion, or 9 percent, of all household debt in the first quarter, up from 6 percent in the third quarter of 2008.
About one in 10 student borrowers is behind on the loans — the highest delinquency rate
of any type of loan tracked by the New York Fed’s quarterly household debt report.
Student loans account for 10.6 percent of that total, up from 3.3 percent in 2003,
while housing’s share, though still great, has fallen back to 2003 levels.
The Federal Reserve Bank of New York said Wednesday
that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the United States economy.
But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.”
Student loan debt, driven by soaring tuition costs, now makes up 11 percent of total household debt, up from 5 percent in the third quarter of 2008.
One of the big drivers of the latest debt binge has been student loans, whose mounting burden can
prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.
Defaults have been creeping up in auto loans — one of the few sectors in which lenders were willing
to extend credit to subprime borrowers on the financial margins after the 2008 crisis