The Federal Reserve Bank of New York issued a press briefing along with the update to its Household Debt and Quarterly Credit Report. It highlighted new research into the relationship between student loans and homeownership. At the same time, the update provides some insight into topics relating to New York bankruptcy.
Beginning with the good news, bankruptcies and foreclosures are at a record low—as far as the NY Fed can tell. There are, however, a few reasons why most Americans are better off debt-wise than even before the Great Recession. One, the composition of household debt has shifted away from housing debt toward auto debt and student loan debt. (The NY Fed researched the rise in subprime auto loan delinquencies a few months ago.) Two, since the Great Recession debtors have tended to be older and have higher FICO scores. Three, the shift toward student-loan and auto debt appears to be concentrated in lower-income areas while upper-income areas are nearing their pre-2008 peak. So long as credit-card debt and mortgage balances remain low in high-income areas, bankruptcies aren’t likely to rise.
Nevertheless, student-loan balances and delinquency rates are still elevated compared to other kinds of debt. More students are taking out larger amounts of debt, and they aren’t repaying their balances as rapidly. College graduates in 2015 owed $34,000, up from $20,000 in 2005. Student debt is also highly concentrated: 30 percent of all education debt is held by 5 percent of borrowers, all owing more than $100,000. Unfortunately, their delinquency rates are growing too.
The NY Fed focused its special report on the gaps in the research on student borrowing and homeownership. In particular, it compared homeownership rates among college attendees with and without debt, and homeownership rates against college attendance and family background. The researchers used data on Americans born between 1980 and 1986.
The big finding was that student debt dampens homeownership among college attendees, but student debtors still tend to own homes more often than people who don’t go to college. This holds true for people with bachelor’s degrees over those with associate’s degrees, and non-college attendees had the lowest homeownership rates. A similar pattern appeared for people who either finished or didn’t complete college, with or without student debt. Finally, the authors discovered that over time, student debtors from ZIP codes with mean incomes below $55,000 in 2010 were about as likely to own homes as people from ZIP codes with mean incomes above $55,000. The authors interpreted this finding as evidence of college’s positive effects on income mobility.
The NY Fed’s report on its press briefing is here and its post on student debt and home ownership is here.
Fewer bankruptcy filings are welcome, but student debt is increasingly becoming a national policy problem. If your debt situation doesn’t fit the national trends, then talking to an experienced New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
