Student Debt Passes $14 Trillion, One-Third in Default

Aug. 21 (UPI) -- The total amount of household debt in the United States has grown for the 20th consecutive quarter and student loans have become the most prevalent type of "severely derogatory" debt, new statistics show.

The Federal Reserve Bank of New York said in its quarterly report household debt climbed by nearly $200 billion in the second quarter, to nearly $14 trillion. 

Not only has rising student debt become the most defaulted, the New York Fed classified the spike over the last few years as "stunning."

"The outstanding severely derogatory balance is comprised of 35 percent defaulted student loans, which have grown stunningly since 2012," the report states.

The New York Fed defines "severely derogatory" as any kind of delinquent loan -- along with repossession, foreclosure or charge off -- meaning the lender has removed a debt from its books.

The report also found that student loan delinquency rates increased by 10 percent for the period between April and July, transitioning at high levels to relative types of debt.

Ashley Harrington, senior policy counsel at the Center for Responsible Lending, says one reason for the high rate of derogatory student debt is that 90 percent of outstanding loans are federal loans, which take longer to default.

"For federal loans, you are not defaulting until 270 days delinquent, and even then it takes a bit longer to show up on your credit report," she said. "Whereas we know very soon when someone is struggling with payments on their credit cards or their cars, or their houses, it takes much longer for us to really register the extent of the issue with student debt."

Total outstanding student debt for the quarter is just under $1.5 trillion, a slight decline from the first quarter -- but the report said the number of households unable to repay them has increased significantly. Student loan debt is the second-highest household debt, behind only mortgage debt.