Even with an improved job market, those student loans are getting harder to keep up with.
While households are generally doing a better job making payments on their mortgages and credit cards, the delinquency rates on student loans worsened in the last three months of 2014, according a new report from the New York Federal Reserve.
“Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student loan balances and delinquencies is concerning,” said New York Fed researcher Donghoon Lee in a statement. “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”
Overall, household debt levels rose one percent—to $11.8 trillion—in the fourth quarter of 2014, after a steady decline in loan balances following the Great Recession reversed course in the fourth quarter of 2013. Outstanding balances were up for mortgages ($39 billion), student loans ($31 billion), car loan ($21 billion) and credit card debt ($20 billion).
Credit inquiries within six months—a bellwether of borrowing demand—rose by 4 million from the previous quarter, to 175 million, according to the New York Fed report. Mortgage originations, which include both new mortgages and refinancings, rose to $355 billion. But that’s still low by historical standards, the report said.
Student loans continue to pile up, now totaling $1.16 trillion in outstanding balances, one of the main reasons researchers have cited for the low levels home ownership among young adults.
“(But) student loan debt looks more prone to delay, not derail, home ownership for most millennials,” according to a report Monday from economists at Wells Fargo Securities.
In a survey by the bank last June, millennials said that if the weren’t paying off debt, their biggest financial priority would be buying a home, the economists said. They also noted that while student loan borrowers tend to have lower home ownership rates than those with similar education levels—but without of student debt—those home ownership rates are nearly the same by the time they reach of 35 to 40 years old.
As American households pick up the pace of borrowing again, credit is expanding around the world. Despite widespread talk of “deleveraging” after a global credit bubble burst in 2008, the world continues to pile on more debt. According to a new study by McKinsey, the world ended last year some $57 trillion deeper in debt than it was in 2007.
The total tab—owed by governments, companies and households—is now more than twice the value of the world’s total economic output.
The biggest chunk of new borrowing since 2007—some $25 trillion—has come from governments going deeper into hock. Of the nearly 50 countries included in the analysis, only five—Argentina, Egypt, Israel, Romania and Saudi Arabia—have paid down some of their debt.