Consumers continued to take on student loan debt, reduce credit card balances

During the first quarter of the year, consumers continued to cut the balances they carried overall, particularly slashing their credit card debt and mortgage balances, but still sought out new lines of student loan financing.

The total amount of money consumers owed on all their outstanding lines of credit slipped once again in the first quarter of 2012, falling by roughly $100 billion to a total of $11.44 trillion, down 0.9 percent from the final three months of last year, according to the latest Quarterly Report on Household Debt and Credit published by the Federal Reserve Bank of New York. The two most significant driving factors in pushing down outstanding balances were sizable declines both outstanding home loan balances, which fell $81 billion – or 1 percent overall – to a total of nearly $8.19 trillion.

Further, consumer credit card debt continued its continual slide, falling to $679 billion from the $704 billion observed at the end of last year, the report said. This was also another decline on an annual basis, from the $696 billion seen in the same quarter last year. Further, consumer credit card balances are also down 21.6 percent from the all-time high of $866 billion in the final quarter of 2008.

But even as consumers eschewed most other types of debt, student loans continued to surge, the report said. Outstanding balances on these accounts now stand at $904 billion, up $30 billion from the fourth quarter last year and an increase of $663 billion from the totals seen in 2003. Student loan debt has been the second-largest form of consumer credit, surpassing credit card balances, since the second quarter of last year, and Donghoon Lee, senior economist at the New York Fed, noted that is the only form of consumer credit that has increased significantly from the totals seen at the all-time peak for household credit seen in 2008.

Nonetheless, consumer appetite for new credit has grown significantly in the last two years, and now stands 15.5 percent higher than the levels seen in the first quarter of 2010, the report said.

Consumers have been trying to get out from under their outstanding balances since the recession hit, and many have been successful in finding at least some amount of debt relief during that time.