As the total student loan debt continues to surge, the quality of borrowers is in steep decline.
The total level of debt for so-called deep subprime borrowers totaled $8.2 billion in the first quarter of 2017, a jump of 32 percent from the same period a year ago, according to SNL Financial citing data from the Consumer Financial Protection Bureau. The category applies to borrowers with less than a 580 credit score.
"It was the first year-over-year increase in more than two years and the largest jump since 2009 when high unemployment rates from the Great Recession sent many consumers back to school," SNL researchers said in a note.
Household debt overall just recently passed the peak it hit before the Great Recession. New York Federal Reserve figures show total household debt at $12.73 trillion, $50 billion above where it stood in the third quarter of 2008.
Of that total, a record $1.34 trillion is education-related, about 11 percent of which is considered seriously delinquent, or at least 90 days past due. That rate is actually a bit lower than the 11.2 percent at the end of 2016.
Despite the seemingly grim trends, economists are not especially alarmed.
In general, they believe the subprime debt situation shows little danger of spiraling into a similar situation as the financial crisis. In the event that triggered the recession, poor-quality mortgage borrowers defaulted in droves, setting off a liquidity crisis on Wall Street that spread through the broader economy.
Michael Pearce, a U.S. economist at Capital Economics cites several trends: The growth in household net worth — $92.8 trillion at the end of 2016 compared with $56.2 trillion at the end of 2008 — along with the debt to household worth and its nature.