For the first time since the recession started, the college enrollment rate among young people has slipped, possibly signaling slower growth in student debt amid soaring delinquency rates and poor employment prospects.
In October 2012, 32.7% of people 16 to 24 years old were enrolled in college, the Labor Department said Wednesday in its annual reading. That's down from 33.4% a year earlier. The last time there was a decline was in 2006.
The total number enrolled also dropped to 12.7 million from 12.8 million, despite a slight uptick in the number of fresh high school graduates entering college.
Trillion-Dollar Problem The decline comes as student debt closes in on the $1 trillion mark and threatens to hobble borrowers as well as the economy for years to come.
A recent New York Federal Reserve study found younger holders of student debt have slashed the amounts of credit card, auto and mortgage debt compared to 2005, weighing on consumption.
Smaller loads of other types of credit haven't necessarily made servicing student debt any easier. For example, much of the decline in non-student debt has come from mortgages, but people without mortgage debt must still pay rent.
And because many Americans remain unwilling or unable to buy homes, demand for apartments is up and rents are surging.
Not surprisingly, delinquency rates on student loans are rising. The share of borrowers younger than 30 years old who are in repayment and more than 90 days delinquent was 34.9% in 2012 vs. 26.1% in 2008 and 21.2% in 2004.
Young people's employment prospects are grim too, and those with jobs often take less pay to work in fields that don't require college degrees.
While more were employed in October compared to a year earlier and fewer were in college, the labor participation rate among those aged 16-24 fell to 55.3% from 55.9%.
But the mountain of student debt still looks to grow at a worrisome pace. Last fall's 32.7% enrollment rate remains above the rate seen before the recession, when it was below 30%.
It still pays to go to college. Young people with bachelor's degrees or higher still enjoy the highest employment rates.
And despite recent payroll gains in lower-skilled industries, the job picture for young people who dropped out of high school actually got worse last year.
The share of male dropouts with jobs sank to 52.1% from 59.3%, and their participation in the labor force also slipped. Employment among female dropouts fell to 35.6% from 39.3%.