Latest news with #New York Fed
Yahoo
05-08-2025
- Business
- Yahoo
Record Surge in Past-Due Student Loans Adds to US Debt Burden
(Bloomberg) -- The share of US consumer debt in serious delinquency rose in the second quarter to the highest level since early 2020, reflecting a record surge in past-due student-loan debt. PATH Train Service Resumes After Fire at Jersey City Station Mayor Asked to Explain $1.4 Billion of Wasted Johannesburg Funds Chicago Curbs Hiring, Travel to Tackle $1 Billion Budget Hole All Hail the Humble Speed Hump Shop Top Mortgage Rates Personalized rates in minutes A quicker path to financial freedom Your Path to Homeownership Some 3% of debt was at least 90 days delinquent in the April-to-June period, up from 2.8% in the first three months of the year, the Federal Reserve Bank of New York said Tuesday in its Quarterly Report on Household Debt and Credit. The share of student-loan debt entering serious delinquency was 12.9%, the highest in 21 years of data. The rise in delinquencies suggests American households are facing increasing financial distress this year amid high interest rates and a slowdown in hiring. Recent data showed consumer spending fell in the first six months of 2025, even before tariffs started to boost prices. 'This quarter's flow of household debt into serious delinquency was mixed across debt types, with credit card and auto loans holding steady, student loans continuing to rise and mortgages edging up slightly,' Joelle Scally, an economic policy adviser at the New York Fed, said in a press release. Overall household debt increased by $185 billion in the second quarter to $18.4 trillion, according to the report, bringing aggregate debt balances 30% higher than where they were before the pandemic. For comparison, US gross domestic product has risen 38% over the same period. Alongside the surge in seriously delinquent student loans, transitions into serious delinquency for mortgages and home equity lines of credit rose slightly, while holding steady for auto loans and declining for credit-card debt. Student loan delinquencies have been on the rise since the beginning of the year, after the government ended a years-long payment freeze. Still, the share of such debt at least 90 days past due, at 10.2%, remained a bit below pre-pandemic levels in the second quarter of 2025, according to the report. In a briefing with reporters, New York Fed researchers said student-loan delinquencies would likely continue to rise, eventually returning to pre-pandemic levels. Between late 2012 and early 2020, the share of student debt that was seriously delinquent ranged between 10.7% and 11.8%. Close Attention Fed officials are paying close attention to the state of the consumer as they hold interest rates steady. On Wednesday, Fed Chair Jerome Powell told reporters delinquency rates 'are not a problem,' adding that 'essentially, you have a consumer that's in good shape and is spending,' though 'not at a rapid rate.' Recent data from other sources indicate middle- and upper-income households are increasingly falling behind on credit-card and auto-loan payments. That trend raises the stakes for an economy that has come to rely more and more on consumer spending from top earners to power continued expansion. Delinquency rates for mortgages, which comprise the largest share of household debt, have 'risen modestly' but remain near historically low levels, according to the report. The biggest increase in delinquency rates has been for loans insured by the Federal Housing Administration, or FHA loans, which typically include more first-time buyers and lower-income borrowers. A tightening of lending standards since the Global Financial Crisis has led to an improvement in the credit quality of mortgage borrowers, but risks could rise as the housing market slows after a post-pandemic surge in home prices, the New York Fed researchers said. 'While home prices have only declined slightly, there is some risk that a continued decline in home prices may add pressure should more borrowers find themselves underwater,' they wrote in a blog post published Tuesday alongside the report. Russia's Secret War and the Plot to Kill a German CEO AI Flight Pricing Can Push Travelers to the Limit of Their Ability to Pay Government Steps Up Campaign Against Business School Diversity What Happens to AI Startups When Their Founders Jump Ship for Big Tech How Podcast-Obsessed Tech Investors Made a New Media Industry ©2025 Bloomberg L.P. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
05-08-2025
- Business
- Yahoo
NY Fed flags rise in student loan borrowing troubles in second quarter
By Michael S. Derby NEW YORK (Reuters) -Total household debt levels rose during the second quarter as a growing number of student loan borrowers and some newer home borrowers faced rising credit challenges. The New York Fed said on Tuesday as part of its latest Quarterly Report on Household Debt and Credit that overall borrowing during the second quarter increased $185 billion, or 1%, from the first quarter to $18.39 trillion. Housing-related credit, which makes up the bulk of borrowing in the U.S. economy, ticked up $131 billion to $12.94 trillion. The report noted that the overall move of different types of debt into some type of delinquency was 'elevated' during the second quarter, with 4.4% of overall borrowing hitting some level of delinquency, a very slight rise from what was seen in the first quarter. The move into trouble status was 'mixed' across borrowing types, the New York Fed said, with delinquent mortgages and home credit lines up 'slightly' from the first quarter, with student loan woes up 'sharply.' The rise in troubled student loans was not unexpected given the recent ending of the debt payback moratorium and the return of reporting troubled borrowing to credit agencies. Some 10.2% of student borrowing is now 90 or more days delinquent, the report said. What's more, New York Fed researchers expect the troubles for student borrowing to continue to rise. Student loan borrowing challenges have been an ongoing issue for the overall economy as rising trouble there can impair other types of borrowing and cause lasting financial damage to those who are facing difficulties. During the second quarter total student loans were $1.64 trillion. HOUSING FRICTION The New York Fed report also delved into housing trends and found that against a solid overall landscape where borrowing has been bounded by strict credit standards, there are rising issues with loans from the Federal Housing Administration, which exists to help facilitate first-time borrowers. 'Despite the recent uptick in mortgage delinquency, overall mortgage performance remains strong by historical standards,' said Joelle Scally, an economic policy advisor at the New York Fed, in a press release. That said, New York Fed researchers wrote in a blog post accompanying the debt report that FHA mortgages 'have recently seen the steepest rise in delinquency rates, with transitions into 30 days past due exceeding four percent quarterly.' In terms of geography, they noted there were more troubled loans of this type in Southern states and Puerto Rico. But they cautioned that what's happening now may be a return to where things were a few years ago. 'In a way, the current higher-flow delinquency rates are offsetting the artificially low-flow delinquency rates during the pandemic.' Housing-related borrowing could face some headwinds going forward on current trends for home prices, the New York Fed researchers wrote. 'While home prices have only declined slightly, there is some risk that a continued decline in home prices may add pressure should more borrowers find themselves underwater.' The New York Fed also noted second-quarter credit card debt rose $27 billion from the first quarter to $1.21 trillion, while auto-loan borrowing ticked up $13 billion over the same period to $1.66 trillion. Some of the rise in auto-related borrowing was tied to an uptick in car buying to get ahead of tariffs, bank researchers said.
