George Osborne's decision to end a cap on student numbers took universities by surprise

More Americans had difficulties staying up to date with student and auto loan payments in the final quarter of last year, in contrast to other categories of debt where rates of arrears declined.

A report from the Federal Reserve Bank of New York showed US households boosted their overall borrowings, including credit card loans, mortgages, and student loans, by $117bn in the last three months of the year, leaving outstanding debt at $11.83tn.

Delinquency rates dropped overall amid a strengthening economy and job growth, with 6 per cent of outstanding debt overdue by 30 or more days, compared with 6.3 per cent in the third quarter.

Two categories of loans showed worsening payment records, however. By far the worst delinquency rates are in student loans, where 11.3 per cent were overdue by 90 days or more. That was up from 11.1 per cent in the third quarter.

More individuals had problems with auto loans too, the figures showed, with the delinquency rate rising to 3.5 per cent, from 3.1 per cent in the previous quarter. This comes as the number of auto loans made to borrowers with poor credit histories increases.

Student loans surpassed credit cards in 2012 as having the worst delinquency rates in consumer credit. The area has been the focus of concern as student debts steadily rise, with outstanding student loan balances reported on credit reports standing at $1.16tn, according to New York Fed data — an increase of $31bn from the previous quarter.

“Student debt is not dischargeable in bankruptcy like other types of debt; thus, delinquent or defaulted student loans can stagnate on borrowers’ credit reports, creating an ever-increasing pool of delinquent debt,” New York Fed staff wrote in a blog posting.


Outstanding household debt in the US

The loans now account for 10 per cent of total household debt, the biggest single category after mortgages, which are 69 per cent of outstanding borrowings.

Seven in 10 graduating seniors at public and private non-profit colleges had student loans in 2013, according to numbers released by The Institute for College Access & Success last year. In six states including New Hampshire, Delaware and Pennsylvania, the average student debt topped $30,000.

“We continue to see rising student debt levels and that can have implications for the future,” said Lauren Asher, TICAS president. “For a generation now the costs students and families are expected to cover have outpaced incomes and available grant aid.”

However, Ms Asher also pointed out that separate government statistics recently revealed a quarterly decline in delinquency rates for direct federal student loans. This comes amid attempts to publicise income-based repayment plans, which aim to help graduates by tying monthly payments to their incomes.

Homeowners were more successful in keeping up with mortgage payments, with the share of mortgage debts that were 90 days or more overdue falling to 3.1 per cent from 3.2 per cent the previous quarter. That remained significantly higher than rates of 1 to 1.5 per cent seen before the Great Recession, however. Credit card delinquencies were the lowest since New York Fed data started in 1999.

Denise Horn, assistant press secretary at the US Department of Education, said: “We know that the rising cost of higher education and growing levels of student debt hit home for millions of Americans. That’s why the department is committed to ensuring borrowers are empowered with the necessary information to make informed decisions that are most appropriate for their financial circumstances.”

She added: “In addition to expanding income-based repayment options and reaching out to struggling borrowers to make them aware of the flexible options available to repay their debt, the department has also created tools such as the College Scorecard and Financial Aid Shopping Sheet so that students and families can understand their options and choose the college that provides them with the best value”.

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