Could Delinquent Student Loans Slow the Economy in the Coming Years?

April 21, 2016 | Jesus Jimenez, Principal

This week’s chart of the week looks at delinquent balances by loan type from 2003 through 2015. In general, total loan delinquencies — auto, mortgage, student, and credit card — remain subdued compared to their levels between 2007 and 2012. However, one area of concern is the significant increase in delinquent student loans, which has increased 97% since 2008. Although they constitute a relatively small percentage of total delinquent loans, they could have negative ramifications for years, as current or former students attempt to pay down their debt and thus have less money to consume on other items, not to mention their damaged credit score could affect their abilities to obtain mortgages and other financing for large ticket items in the future. So while the current level of student debt may not be an immediate threat to the economy, it could create economic headwinds in future years.