NEW YORK, Dec 15 (Reuters) - New York’s poorest neighborhoods are home to the city’s student borrowers under the most stress, according to a central bank report released on Friday showing “troublingly high” loan default and delinquency rates mainly in the Bronx and Brooklyn.
The Federal Reserve Bank of New York report, billed as the first neighborhood-level study of student loans in any U.S. city, showed that borrowers in New York had on average $34,900 in debt, 18 percent above the national average. About 1 million, or 15 percent, of residents had loans, totaling $34.8 billion of the country’s $1.3 trillion in student debt.
Borrowers aged 45 and older and those with lower student loan balances struggled the most, the report on the largest U.S. city found. Bronx borrowers had an average balance of $14,784 compared with $21,483 for those in Manhattan.
Student loans account for a growing share of the total U.S. debt of $12.8 trillion, and delinquency rates have remained stubbornly high since 2004, a trend that has perplexed and concerned some policymakers.
The report suggests poorer borrowers are bearing the brunt of this trend that New York Fed President William Dudley has warned could ultimately hurt overall U.S. home ownership and consumer spending. Delinquencies and defaults damage borrowers’ credit reports, hampering their ability to make investments and climb the economic ladder.
New York’s lower-income neighborhoods had disproportionately high delinquency and default rates, and successful repayments varied widely across its five boroughs and many neighborhoods, the report found. The New York Fed defined low-income areas as those with residents earning less than $35,900 annually, while high-income was more than $72,301.
The Bronx, the northernmost borough with the city’s lowest median household income of $35,302 last year, had the most student-loan distress and was home to four of the five neighborhoods with the highest default rates, the report said. They included Belmont, Crotona Park East and Hunts Point. The other neighborhood, Brownsville/Ocean Hill, is in Brooklyn, in the city’s southeast, which had $50,640 in median income according to the U.S. Census Bureau.
The lowest-income neighborhoods had a 20 percent delinquency rate, more than twice that of the highest income neighborhoods, particularly Manhattan which had a median household income of $75,513 last year.
More than half of student borrowers in high-income areas reported successfully paying down their loans, compared with about a quarter in low-income areas.
“We hope that this report will serve as a foundation for policymakers and other stakeholders to develop pragmatic solutions that can provide relief to struggling borrowers,” the authors wrote.
The report, based on the New York Fed’s consumer credit data, urged programs to assist with enrollment and educate borrowers on repayment programs. (Reporting by Jonathan Spicer; Editing by Richard Chang)