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2 groups have the most trouble with student debt

Even while Americans were making great strides in "deleveraging" during the Great Recession, one category of debt kept rising: student loans. In particular, student borrowing increased substantially for older students and those from low-income areas, according to a report from the New York Fed.

Rising student debt for these two groups isn't really unusual during poor economic times. When growth is floundering and jobs are scarce, people turn to education and the promise it holds of better employment in the future. However, the promise hasn't been fully realized for these two groups, and now they're struggling to pay off their student loans.

Among the New York Fed's findings:

  • Although most types of household debt declined after the Great Recession, student loan balances have increased steadily. The largest growth in this category was for borrowers from the lowest-income areas and among older borrowers. For example, the number of borrowers aged 40 and older grew nearly twice as fast as the rate for younger borrowers.

  • Students taking out loans in 2009, the focus of the report, have made little or no progress in paying off their loan balances. "The aggregate balance, five years after leaving school, is still at 97 percent of what it was when they left school. This is in sharp contrast with the borrowers from wealthier Zip codes, who have ... paid down nearly 30 percent of their balances."

  • Half of the borrowers who took out loans in the 2009 cohort are having problems paying them back, and the problems are concentrated among borrowers from the lower-income areas, with 70 percent of these borrowers having some sort of repayment problem. However, only 37 percent of borrowers from the highest-income areas have had repayment difficulties. The default rate in low-income areas is nearly three times that in higher-income areas.

  • Borrowers in their 30s had the highest default rates, and they also had the highest balances. For borrowers who originated loans in 2009, half of those over 30 have either defaulted or become seriously delinquent.

When the economy is doing poorly and jobs hard to come by, it's in our collective interest for the young to go to college instead of hopelessly searching for a position, and for older workers who have lost jobs to return to school and upgrade their skills. But people in these groups, especially those from low-income areas, aren't getting the support they need -- and they're drowning in a sea of debt.

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