Student loans play an increasingly important role in financing higher education. Student loan debt from federal and private loans almost tripled between 2004 and 2012 across the nation, and is now close to $1 trillion.
Many District youth attend out-of-state schools, and despite federal tuition support for District students, increasing burdens of higher education is an important financial consideration for District families. We estimate that total stock of student loans in the District was approximately $5.1 billion at the end of 2012, up from $2.2 billion in 2004. Some of this increasing burden is imported; it belongs to those who moved to the District after school, in search for better jobs. Still, the total growth in borrowers outpace the population growth, suggesting that some of the increase is due to higher demand for higher education,and rapidly increasing costs, which push more people into borrowing. In 2012, 126,000 individuals, that is, one fifth of the resident population, reported student loan balances in the District. This figure was 73,000 in 2004, only 13 percent of the total population for that year.
Indeed, data show that average student loan borrowing in the District is the highest in the nation. According to data collected by the Federal Reserve Bank of New York, average student debt among D.C. residents was $41,200, up from $30,000 in 2004. To compare, student debt among residents of New York City was $11,000 less, and debt reported for the entire nation was $16,000 less. Even residents of Manhattan carried less student debt in 2012, at $38,500.
Who carries the biggest student loan burden? They are mid-carrier individuals, likely still paying for their own student debt. Those between the ages of 30 and 40, on average, report about $50,000 in student debt, and survey data suggest that this group accounts for 45 percent of all borrowing in the District. Borrowers from this age group carry the highest balances in the nation, too, but their individual borrowing are not as high in relative terms, so they account for 33 percent of total borrowing across the nation. Those below the age of 30 (bulk of the millenials) are not far behind, juggling about $37,000 of debt, accounting for the 35 percent of total borrowing in DC.
District residents above the age of 50, on average, owe $31,100. These borrowers could be parents paying for their own children’s education; they could also be professionals who went to school at a later age to get a graduate degree–an important consideration in career advancement in the District’s competitive labor market. The average loan amount older residents carry is much higher than the national average of $24,800, but a as a group, 50+ year-olds do not borrow intensively: they only account for only 9 percent of the borrowing In the District, compared to 16 percent in the nation.
Delinquency rate for student loans is increasing and this increase will likely continue given many loans were deferred in 2012, and were still under the grace period when data were collected. Delinquency rate in the District stood at 16 percent at the end of 2012, up from 11.8 percent the year before. The same year, national delinquency rate was at 17 percent, and in NYC, this rate was 16.5 percent. However, District residents have relatively small delinquency balances at about 7 percent of their total borrowing, compared to the national average of 11.7 percent and NYC average of 10.5 percent.
Surprisingly, delinquencies among 50+ year-olds are very high at 22.4 percent—this is 6.4 percentage points above the average across all age groups in the District. Across the nation, this age group has the lowest delinquency rate. However, on loans that are bulk of the borrowing in the District—those carried by 30- to 40-year-olds—delinquency rates are much lower at 13.6 percent and these borrowers have been delinquent only on 7 percent of their total balances, compared to the 12 percent across the nation. Younger adult residents of the District do even better—under-age-30 delinquency rates are similar to the nation at 15 percent, but these borrowers are delinquent on 5 percent of their balances compared to 9 percent across the nation.
What exactly is this data? Student borrowing and default data is a part of The FRBNY Consumer Credit Panel, a nationally representative 5% random sample of all individuals with a social security number and a credit report (usually aged 19 and over). Delinquency rates are calculated as the proportion of student loan borrowers with 90+ days past due accounts (including defaults).