By Michael S. Derby
NEW YORK, May 12 (Reuters) – The current problems with student loans in the United States do not appear to be on track to create broader problems in the consumer lending space, a New York Federal Reserve report released on Tuesday showed.
The regional Federal Reserve Bank made the conclusion in its broad overview of consumer debt trends in the first quarter, which found modest gains in key types of borrowing and little change in overall delinquency rates, in a period marked by a stable labor market and continued economic growth.
In recent quarters, student loan indebtedness has followed a worrying path after the government began forcing borrowers to pay back loans after a long pause. The New York Fed said the flow of student loans that went into serious trouble moderated during the quarter and that the overall level of defaults on that type of loan was “relatively low.”
However, student loan borrowers have “very high delinquency rates across all credit products” and “these high rates suggest that their repayment difficulties extend beyond their student loans, and are likely to worsen when collection efforts resume,” according to a blog post accompanying the New York Fed’s debt report.
Despite those problems, its overall credit use in the U.S. economy is relatively modest, and “the effects of the recent wave of defaults and delinquencies on broader credit markets are likely limited,” New York Fed economists wrote.
Beyond student loans, Americans’ debt management is “generally on a fairly stable footing” amid some signs of “weakness,” New York Federal Reserve researchers said in a conference call with reporters.
The report says the transmission rate of student loans becoming serious delinquencies was 10.9% in the first quarter, compared to a rate of 16.2% in the fourth quarter of 2025.
The overall student loan delinquency rate in the first quarter was 10.3% for loans with three or more months of trouble, up from 9.6% at the end of the fourth quarter of 2025. About 2.6 million student loan borrowers who were 120 days or more late on their payments had their loans referred to the U.S. Department of Education’s Default Resolution Group.
The report said total debt default rates remained largely stable during the first quarter at 4.8%.
STABLE HOUSEHOLD DEBT TRENDS
Overall household debt trends remained stable in the first quarter.
It’s unclear whether that relative calm will hold as consumers grapple with rising energy prices linked to the war in the Middle East, which has disrupted global supply chains. Recent research from the New York Federal Reserve said low-income households are increasingly stressed by higher energy costs.