Student loans a detriment to wealth

Fifteen percent of American households have either zero or negative net wealth, according to a survey conducted by the Federal Reserve Bank of New York, potentially affecting their ability to save for major purchases and restricting their access to credit.

The results, published last week on the New York Fed’s Web site, showed the rise in student-loan debt burdens is a significant factor for those households. Homeowners also are still struggling with negative equity a decade after the housing bubble burst.

“Overall, some 7 percent of homeowning households in our survey report being underwater on their mortgage,” the report’s authors Olivier Armantier, Luis Armona, Giacomo De Giorgi and Wilbert van der Klaauw said in a blog post.

The data were collected in August 2015 through a special question in the New York Fed’s monthly Survey of Consumer Expectations.

“It is likely that the steady growth in student debt and borrowing, combined with the very slow rate of student-loan repayment we have documented elsewhere, has materially contributed and will continue to contribute to negative household wealth and wealth inequality,” the researchers said. “On the other hand, the continued recovery in the housing market observed over the past few years may help households with negative home equity come out of their negative wealth position.”

The US economy grew by a lessthan-forecast 1.2 percent annualized rate in the second quarter, according to a government report on Friday. Household consumption, which accounts for about 70 percent of the economy, grew at a 4.2 percent annualized rate.