WASHINGTON (5/15/14)--Led by $31 billion in student loans, household debt increased for the third consecutive quarter, according to the Federal Reserve Bank of New York.
As the fastest-growing category, student loan balances now stand at $1.1 trillion--a number that is weighing down the economic capability of college graduates.
Led by $116 billion in mortgages, outstanding household debt ticked up 1.1% from the previous quarter to a total $11.65 trillion. However, new mortgage originations slumped for the third straight quarter, hitting $332 billion, the lowest since the third quarter of 2011.
Increased student-loan debt may be keeping those borrowers from taking on more debt in houses and cars, Fed researchers said Tuesday (The Wall Street Journal May 14).
A new Pew Research Center analysis of the most recent Survey of Consumer Finances, student debt was held by 37% of households headed by an adult age 40 or younger--up from 22% in 2001 and 16% in 1989. Those debt obligations are hindering wealth accumulation, Pew noted.
A household headed by a young, college-educated adult without any student debt obligations has about seven times the typical net worth, or $64,700, of households headed by debt-laden young adult at $8,700.
"We're simply saying that young adults with student loan debt are far behind in building their nest eggs," said report author Richard Fry (CNN.com May 14).
With auto loans and credit cards, younger households tend to be more indebted than older households, Pew noted, adding the leverage ratio of outstanding debts to household assets is even more heavily weighted in the young, college-educated, debt-holding households. At 67%, student debtor households are nearly twice as leveraged as those with no student debt at 34%.
The dissatisfaction with personal finances is higher in those who borrowed for college vs. those who didn't. They also are less likely to say their education has paid off.