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  4. US household debt rises in the third quarter, boosted by mortgage borrowing and student loans

US household debt rises in the third quarter, boosted by mortgage borrowing and student loans

Ben Winck   

US household debt rises in the third quarter, boosted by mortgage borrowing and student loans

In this Sept. 25, 2019, photo a realty company's signs rest on several lawns in front of newly constructed houses in Brandon, Miss. On Thursday, Oct. 10, Freddie Mac reports on this week's average U.S. mortgage rates. (AP Photo/Rogelio V. Solis)

Associated Press

In this Sept. 25, 2019, photo a realty company's signs rest on several lawns in front of newly constructed houses in Brandon, Miss. On Thursday, Oct. 10, Freddie Mac reports on this week's average U.S. mortgage rates. (AP Photo/Rogelio V. Solis)

  • Total US household debt crept higher to $13.95 trillion in the third quarter, marking the 21st consecutive quarter of increased borrowing.
  • Increased mortgage borrowing was likely driven by homeowners "taking advantage of a low-interest rate environment," New York Fed research officer Donghoon Lee said in a statement.
  • Student loan debt jumped by $20 billion to $1.5 trillion in the third quarter. The Fed also released a study detailing student loan default rates in black-majority zip codes landing twice as high as the rate in white-majority areas.
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Total US household debt grew by $92 billion to $13.95 trillion in the third quarter, marking the 21st consecutive quarter of increased borrowing.

The increase was primarily driven by multibillion-dollar jumps in housing debt and outstanding student loans, according to the Federal Reserve Bank of New York. Mortgage balances rose by $31 billion in the third quarter to $9.44 trillion, continuing an upward trend as mortgage rates fall further from 2018 highs.

Student loan debt jumped by $20 billion to $1.5 trillion in total. More than 10% of loans were at least 90 days delinquent or in default, the highest proportion among the Fed's highlighted debt categories.

Borrowers were likely "taking advantage of a low-interest rate environment," New York Fed research officer Donghoon Lee said in a statement. The Federal Reserve issued its third rate cut of the year on October 30, slashing its benchmark interest rate by 25 basis points and signaling a pause to future adjustments.

Fed chair Jerome Powell reiterated the central bank's stance Wednesday. The Fed's current stance is optimal for the current pace of economic growth, he said, and central bank officials would need to see additional threats or uncertainties to consider additional cuts.

"Looking ahead, my colleagues and I see a sustained expansion of economic activity," he added.

The central bank also released a blog post on Wednesday detailing racial disparities in student loan delinquencies. The Fed found student loan default rates in black-majority zip codes landing twice as high as the rate in white-majority neighborhoods. Predominantly black neighborhoods also hold greater total balances of student debt among their populations compared to Hispanic-majority and white-majority zip codes.

The repayment hurdles "point to the likely importance of income differences across borrowers from different areas," the report said.

The central bank released the data at 11:00 a.m. ET Wednesday. Fourth-quarter data is scheduled for release on February 11, 2020.

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