Student loan debt continues to increase as other forms of household debt decrease, a recent report from the Federal Reserve Bank of New York shows. This continues the trend of the past four years.

The third quarter of 2008 marked the peak of household debt. Since then, student loan debt has increased by $293 billion; other forms of household debt collectively decreased by $1.5 trillion.

For the first quarter of 2012, consumer credit reports showed:

  • the amount of student loan debt was $904 billion nationally; and
  • the amount of overall indebtedness was $11.5 trillion nationally.

Student loan debt is the only form of debt to “substantially” increase since 2008. In the second quarter of 2010, this form of debt surpassed credit card debt as the second highest form of consumer debt.

At 8.7%, 90-day delinquency rates for student loan debt in the first quarter of 2012 were higher than those for mortgages, but were lower than their peak of 9% 18 months earlier.

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Student loans are taken out with the expectation of repayment from the future well-paying careers awaiting newly educated college graduates. Unfortunately, today’s anemic jobs market frustrates the attempts of college grads to pay off their student loans.

As young adults continue to rack-up student loan debt, California real estate agents can expect the entry of the Generation Y (Gen Y) demographic into the real estate market as homebuyers to be delayed.

Limited job opportunities, with low pay, coupled with graduates’ high debt-to-income (DTI) ratios means twenty-somethings straight out of college will not be able to afford the costs of homeownership or likely qualify for purchase-assist financing anytime soon.

Related articles:

College debt makes graduates hesitant to become homeowners
The demographics forging California’s real estate market: a study of forthcoming trends and opportunities – Part I

This means that while they wait for Gen Y to beef-up (financially speaking) and fill the role of homebuyers, real estate agents need to brush-up their property management skills. Rental activity will dominate the housing market over the next several years since those recovering from foreclosure-damaged credit scores or weighted with student loan debt have few other options for housing.

Related article:

Rentals: the future of real estate in California?

College graduates: a powerful economic force

Re: “Quarterly Report on Household Debt and Credit” from the Federal Reserve Bank of New York