Unequal Distribution of Delinquencies by Gender, Race, and Education
This post is the second in a three-part series exploring racial, gender, and educational differences in household debt outcomes. In the first post, we examined how the propensity to take out household debt and loan amounts varied among students by race, gender, and education level, finding notable differences across all of these dimensions. Were these disparities in debt behavior by gender, race, and education level associated with differences in financial stress, as captured by delinquencies? This post focuses on this question.
Small Business Owners Turn to Personal Credit
In our first post in this series we showed that mortgage provisions under the CARES ACT and its subsequent extensions resulted in a rapid take-up of mortgage forbearances, under which borrowers had the option to pause or reduce debt service payments without inducing a delinquency notation on their credit reports. Here we examine the forbearance take-up rate of a group of mortgage borrowers we expect to have been particularly hard hit by the pandemic recession: small business owners. Relatively little is known about how small business owners have fared over the past year in terms of their personal finances. Were they able to continue making mortgage payments on their homes? Did they draw on home equity to help fund their business operations?
What Happens during Mortgage Forbearance?
As we discussed in our previous post, millions of mortgage borrowers have entered forbearance since the beginning of the pandemic, and over 2 million remain in a program as of March 2021. In this post, we use our Consumer Credit Panel (CCP) data to examine borrower behavior while in forbearance. The credit bureau data are ideal for this purpose because they allow us to follow borrowers over time, and to connect developments on the mortgage with those on other credit products. We find that forbearance results in reduced mortgage delinquencies and is associated with increased paydown of other debts, suggesting that these programs have significantly improved the financial positions of the borrowers who received them.
Keeping Borrowers Current in a Pandemic
Federal government actions in response to the pandemic have taken many forms. One set of policies is intended to reduce the risk that the pandemic will result in a housing market crash and a wave of foreclosures like the one that accompanied the Great Financial Crisis. An important and novel tool employed as part of these policies is mortgage forbearance, which provides borrowers the option to pause or reduce debt service payments during periods of hardship, without marking the loan delinquent on the borrower’s credit report. Widespread take-up of forbearance over the past year has significantly changed the housing finance system in the United States, in different ways for different borrowers. This post is the first of four focusing attention on the effects of mortgage forbearance and the outlook for the mortgage market. Here we use data from the New York Fed’s Consumer Credit Panel (CCP) to examine the effects of these changes on households during the pandemic.
Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race
In an October post, we showed the effect of college tuition subsidies in the form of merit-based financial aid on educational and student debt outcomes, documenting a large decline in student debt for those eligible for merit aid. Additionally, we reported striking differences in these outcomes by demographics, as proxied by neighborhood race and income. In this follow-up post, we examine whether and how this effect passes through to other debt and consumption outcomes, namely those related to autos, homes, and credit cards. We find that access to merit aid leads to an immediate but temporary increase in eligible individuals’ consumption in these categories. The increase is followed by a decline in consumption and a reduction in total debt of these types in the longer term. Importantly, there are marked differences in these consumption and debt patterns across groups, as evident when we introduce proxies for demographic group using the income and racial composition of the students’ home neighborhoods of origin.
Who Borrows for College—and Who Repays?
Student loans are increasingly a focus of discourse among politicians, policymakers, and the news media, resulting in a range of new ideas to address the swelling aggregate debt. Evaluating student loan policy proposals requires understanding the challenges faced by student borrowers. In this post, we explore the substantial variation in the experiences of borrowers and consider the distributional effects of various policy options.
Is There Too Much Business Debt?
Anna Kovner and Brandon Zborowski By many measures nonfinancial corporate debt has been increasing as a share of GDP and assets since 2010. As the May Federal Reserve Financial Stability Report explained, high business debt can be a financial stability risk because heavily indebted corporations may need to cut back spending more sharply when shocks […]
Just Released: A Look at Borrowing, Repayment, and Bankruptcy Rates by Age
Household debt balances increased in the third quarter of 2018, a 17th consecutive increase. Total debt balances reached $13.51 trillion, a level more than 20 percent above the trough reached in 2013, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. With today’s report we begin publishing a new set of charts that depict debt and repayment outcomes by the age of the borrower. The report and this analysis are based on the New York Fed Consumer Credit Panel (CCP), a 5 percent sample of anonymized Equifax credit reports. Here we’ll highlight three of the new charts.
Restoring Economic Growth in Puerto Rico: Introduction to the Series
The difficult economic and financial issues facing the Commonwealth of Puerto Rico have remained very much in the news since our post on options for addressing its fiscal problems appeared last fall. That post was itself a follow-up on a series of analyses, starting with a 2012 report that detailed the economic challenges facing the Commonwealth. In 2014, we extended that analysis with an update where we focused more closely on the fiscal challenges facing the Island. As the problems deepened, we have continued to examine important related subjects ranging from positive revisions in employment data, to the understanding emigration, and to considering how the Commonwealth’s public debts stack up. In most of this work, we have focused on how policymakers could help to address the immediate issues facing the Island and its people. The U.S. Congress and the Obama Administration took action in June to provide a framework to help address Puerto Rico’s fiscal crisis. But much remains to be done to address these ongoing problems, which represent a significant impediment to economic growth in the short run. It also seems important to revisit the question of the prospects for reviving longer-run growth in the Commonwealth. These concerns were underscored by projections published by the International Monetary Fund (IMF) in the April edition of the World Economic Outlook that forecast Puerto Rico’s real GDP and population to decline through 2021.
Some Options for Addressing Puerto Rico’s Fiscal Problems
By Hunter L. Clark, Andrew F. Haughwout, and James A. Orr Puerto Rico’s economic and fiscal challenges have been an important focus of work done here at the New York Fed, resulting in two reports (2012 and 2014), several blog posts and one paper in our Current Issues series in just the last few years. […]