Student borrowers under most stress in New York City’s poorest areas

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By Jonathan Spicer

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)