U.S. student loan debt outstanding reached a record $1.465 trillion last month and one particular set of borrowers is having a hard time paying back their loans, according to a Bloomberg analysis of student loan securitization data. This debt is raising fiscal risks.
“Over 90% of student loans are guaranteed by the U.S. Department of Education, meaning that if a recession causes a rise in youth unemployment and triggers mass defaults, this contingent liability could prove burdensome for the U.S. government budget,” said Paul Della Guardia, economist at the Institute of International Finance in emailed comments.
The record student debt level is more than double the $675 billion outstanding in June 2009 when the recession ended.
For one group of young adults that took out loans in 2012, student loan debt is a particularly stark reminder of college. Loans disbursed in 2012 have defaulted at a faster rate than any other loan cohort since the financial crisis.
While the New York Federal Reserve has data through September, Bloomberg securitization records provide two additional months of data and add insight into defaults in debt liabilities.
The Bloomberg analysis found that loans issued about six years ago have the highest cumulative loss percentage compared to any other year since the financial crisis ended. This indicates that students who took a loan in 2012 have had a much more difficult time making their monthly payments compared to students who received loans shortly before and after — students who have had a similar amount of time to pay them down.