Graduation candidates celebrated on May 12 at the Centenary College commencement in Hackettstown, N.J. Associated Press


Americans owed $904 billion in student loans at the end of March, nearly 8% more than a year ago, the New York Fed said Thursday in a quarterly report on consumer credit. That compares with the $679 billion they owed on credit cards at the end of the first quarter.

Between the fourth quarter of 2008, when credit-card debt peaked, and the first quarter of 2012, this borrowing fell by $187 billion, or 21.6%, the Fed said. Over the same period, student-loan debt rose by 41.4%, or $264 billion.

Americans are reducing their overall debt burden, a process known as deleveraging that began with the financial crisis. Total household debt—including mortgage, student, credit-card and auto loans—has fallen by roughly 10% since borrowing peaked in mid-2008. It stood at $11.44 trillion as of March 31, the New York Fed said.

Mortgage borrowing is down significantly, the consequence of foreclosures, falling home values, tighter lending standards and weak home sales.

But student debt is quickly rising, in part due to higher tuitions, but also because alternative ways of paying for college—such as home-equity loans—have dried up. The Obama administration has expanded federal loan programs, which offer student loans at below-market rates. And, as usually happens in recession, college enrollments have surged as job openings have been scarce.

Educated workers, on average, earn more than workers with less education and college grads are much more likely to have jobs than those without college degrees.

"Borrowing a reasonable amount for programs that lead to degrees and certificates that are likely to improve an individual's long-term outcomes are good for the economy," said Sarah Turner, a University of Virginia economist.

Jason Delisle of the Washington-based New America Foundation argues most students graduate with manageable debt loads. Three-quarters of four-year graduates owe less than $33,857 upon earning a degree, he said, citing Education Department statistics.

But that doesn't mean borrowing to go to school always makes economic sense; borrowing and not finishing a degree, for instance, usually is much less likely to pay off than graduating.

Some economists see signs of trouble. A rising number of student borrowers are behind on their payments; 9% of the total dollar amount of student loans is 90 days or more behind on a payment. Many new graduates are having trouble finding well-paying jobs even as payments come due, and a growing number of students are dropping out of school, meaning they are left with debts but no degree, recent research shows.

"The high delinquency rate [among student borrowers] could be a source of concern," said Wilbert van der Klaauw, a New York Fed economist. "You have to worry about repayment and how it is going to affect not just consumption but possibly lifetime decisions like marriage, fertility and buying houses."

The New York Fed estimates of student debt are slightly lower than the above-$1 trillion figure cited this year by the Consumer Financial Protection Bureau. The New York Fed's estimate is based on a sampling of consumer-credit-firm accounts; the CFPB estimate is based on government data and a survey of private lenders.

The prospect of higher debt is the main reason why Juan Urias, 19, left St. Joseph's College in New York City last year and transferred to LaGuardia Community College, where tuition is lower. The move saved him from borrowing $5,000 more for the coming school year. Financial aid, including federal grants, now covers all his tuition.

"I know how bad it is going to be in the future," he said. Staying at St. Joseph's would have meant leaving school with about $20,000 in student debt. "I can't do it."

Write to Josh Mitchell at