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Student delinquencies up as U.S. household debt hits another record

NEW YORK (Reuters) - The total debt shouldered by Americans has hit another record high, rising to $13.5 trillion in the last quarter, while an unusual jump in student-loan delinquencies could provide another signal that the U.S. economic expansion is growing old.

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Flows of student debt into serious delinquency - of 90 or more days - rose to 9.1 percent in the third quarter from 8.6 percent in the previous quarter, the Federal Reserve Bank of New York reported on Friday. That propelled the biggest jump in the overall U.S. delinquency rate in seven years.

It was a reversal after a period of improvement for student debt, which totaled $1.4 trillion. Serious-delinquency flows have been growing on auto debt since 2012 and on credit card debt since last year, raising red flags for some economists.

The world’s largest economy has grown well above its potential this year on the back of strong consumer spending and the lowest unemployment rate since the 1960s. If growth continues for another year it will be the longest U.S. expansion ever.

Total household debt, driven by a $9.1 trillion in mortgages, is now $837 billion higher than its previous peak in 2008, just as the last recession took hold and brought on massive deleveraging across the United States. Indebtedness has risen steadily for more than four years and sits more than 21 percent above a trough in 2013.

The $219 billion rise in total debt in the quarter ended September 30 was the biggest jump since 2016.

While borrowers are far more creditworthy and lenders are more stringent than in the run-up to the last downturn, the upward creep in serious delinquencies in automobile, credit card and now student debt could unsettle policymakers at the Fed and elsewhere.

Some 4.7 percent of outstanding debt was in some stage of delinquency in the third quarter, up from 4.5 percent previously. This was “primarily due to a large increase in the flow into delinquency for student loan balances,” the New York Fed said in its report.

If the jump in student delinquencies persists, it could raise questions about the ability of income-based repayment programs to ease debt burdens on lower-income borrowers. Unlike auto and credit card lenders, student lenders have not loosened standards in recent years.

Separate data from the New York Fed showed that borrowers aged 30 to 39 years and those 50 and older drove the jump in flows to serious delinquencies, a measure economists use to gauge market stress and likelihood of defaults.

Mortgage delinquency transitions worsened slightly. With the central bank having settled into a gradual rate-hike cycle, mortgage originations grew to $445 billion, from $437 billion in the previous quarter, suggesting borrowers are locking in lower costs while they can.

Reporting by Jonathan Spicer; Editing by Chizu Nomiyama and Nick Zieminski