Student Loan Balance & Repayment Trends in the FRBNY Consumer Credit Panel
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1 PRELIMINARY, PLEASE ASK US BEFORE CITING Student Loan Balance & Repayment Trends in the FRBNY Consumer Credit Panel Donghoon Lee and Meta Brown June 6 th 2012 The views expressed are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of New York or of the Federal Reserve System
2 Student Loan Balance & Repayment Data As far as we can tell, sources are limited. Department of Education Sallie Mae, private lenders Mark Kantrowitz/finaid.org 2003 Transunion data from Board Aggregates in the G.19 SCF Our data: the FRBNY Consumer Credit Panel (CCP) Panel of loans, individual- and household-level, based on individual credit reports from Equifax. Quarterly reports on HH credit conditions, blogs, internal & external publications
3 CCP/Equifax Sample Design Representative Panel and Household Matching Unique sample design generating a longitudinal quarterly panel of individuals and households from Universe: entire US Population with credit files (240 million individuals per quarter, aged 18 and older.) Sample selection: representative 5% using last 4 digits of SSN + All household members Household matching: based on home address Representative sample of US individuals and households (about 40 million individuals per quarter) directly consistent with macro time-series statistics such as G19
4 CCP/Equifax Sample Design Details of the sample design and creating sample weights: An Introduction to the FRBNY Consumer Credit Panel, Lee and van der Klaauw, 2010
5 Total Debt Balance and its Composition Trillions of Dollars Trillions of Dollars Mortgage HE Revolving Auto Loan Credit Card Student Loan Other 2012Q1 Total: $11.44 Trillion Q4Total: $11.53 Trillion (3%) (8%) (6%) (6%) (5%) (72%) :Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 0 Source: FRBNY Consumer Credit Panel/Equifax
6 1000 Student Loan Balance ($Billion)
7 Aggregate Student Loan Trend Aggregate student loan balance has grown dramatically over the past 13 years, more than doubling since Aggregate student loan balance now larger than aggregate credit card balance. While all other consumer debt categories declined from their 2008Q3 peak (some substantially), student loans have continued to grow rapidly: All other consumer debt off 12 percent, or $1.53 trillion, since 2008Q3. Aggregate student loan balance up 48 percent, or $292 billion, since 2008Q3.
8 Percent of Balance 90+ Days Delinquent by Loan Type Percent Percent Credit Card 10 Student Loan 10 Mortgage 5 Auto Loan HE Revolving :Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 0 Source: FRBNY Consumer Credit Panel/Equifax
9 New Seriously Delinquent Balances by Loan Type Billions of Dollars Billions of Dollars MORTGAGE HELOC AUTO CC STUDENT LOAN OTHER :Q4 04:Q4 05:Q4 06:Q4 07:Q4 08:Q4 09:Q4 10:Q4 11:Q4 0 Source: FRBNY Consumer Credit Panel/Equifax Note: 90 or more days delinquent
10 Student Loan Delinquency Rate Historically, student loans and credit card debt most delinquent. Perhaps surprising, given student loans associated with higher skilled borrowers. but younger borrowers have substantially higher delinquency rates. & credit card and student loan are uncollateralized debts. While mortgage, credit card and auto delinquency have declined substantially from their 2010 peaks, student loan and HELOC delinquency remain at or near peak. All non-sl consumer debt % of balance 90+dpd peaked at 8.7 in 2010Q1, fell to 6.8 by 2012Q1. Student loan % of balance 90+dpd 8.7 in 2010Q1, Q1. 14% of student loan borrowers have some past due balance.
11 What is driving the growth in balance? More students? Higher balance per student? Lower repayment rate among past borrowers?
12 40 # sl borrower (millions) < missing
13 35,000 $ SL balance per borrower 30,000 25,000 20,000 15,000 10,000 5,000 0 <
14 Who are student loan borrowers?
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16
17 35,000 $ SL balance per borrower 30,000 25,000 20,000 15,000 10,000 5,000 0 <
18 18.00% Proportion of SL borrowers with 90+ past due balance 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% <
19 14.00% 90+ delinquent balance proportion 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% <
20 Who is paying down? Who is accumulating?
21 600 $ balance, new and old borrowers age <30, existing borrowers age <30, new borrowers
22 200 $ balance, new and old borrowers age 30-39, existing borrowers age 30-39, new borrowers
23 140 $ balance, new and old borrowers age 40-49, existing borrowers age 40-49, new borrowers
24 60 $ balance, new and old borrowers age 50-59, existing borrowers age 50-59, new borrowers
25 14 $ balance, new and old borrowers age 60+, existing borrowers age 60+, new borrowers
26 The youngest borrowers
27 600 Student loan debt in $billions by 2005 age <
28 0.035 Preliminary: Per Capita Bankruptcies within 24 months by Age
29 Summary Aggregate student loans have increased severalfold since 1999Q1 now the second largest consumer debt category. While all other consumer debt categories declined in balance and became less delinquent since 2009, aggregate student loan debt has continued its long upward trend and become more delinquent. This debt accumulation is driven by More students, Higher balances per student and Slow rates of paydown among past borrowers. Past borrowers under 50 show no evidence of paydown in the aggregate. Aged borrowers show only modest paydown year old borrowers have high and growing delinquency rates. Young student borrowers are accumulating debt at unprecedented rates and have lost default recourse.
30 Additional slides
31 The FRBNY Consumer Credit Panel Panel of loans, individual- and household-level, based on individual credit reports from Equifax Ability to track individual borrower over time: can link over refinances, geographic moves, consolidation; can analyze entry into home-ownership or student borrowing, can follow pay-down Ability to link multiple loans for same person at any point in time: multiple first mortgages, additional first/second mortgages, debt substitution, delinquency profile across various loan types Ability to link individuals in the same household: credit/loan situation of all family members total exposure and distribution within household Account for new entries and exits in a systematic way : Capture a balanced flow of individuals into and out of the data
32 Main Features of FRBNY CCP Longitudinal information on all individual mortgages: first mortgages, closed-end seconds, HELOCs Individual mortgage account variables: opening date, origination amount, current balance, credit limit, delinquency status, individual/joint account, term/monthly payment, GSE loan, narrative codes detailing credit events such as foreclosure Consumer level information on auto loans, credit cards, student loans Consumer-level auto loan, credit card, student loan data: Total balance and # accounts, delinquency detail, origination amount and credit limit Public record information Public record information on bankruptcies, collections, tax liens Individual characteristics Borrower characteristics: birth year, geographic location (state, zipcode, census block)
33 Student Loan information : Roll-up variables Servicers with ZZ (miscellaneous servicers) were dropped from credit trend variables. (account level exclusion) This includes department of education!! Credit trend variables and CMA variables are pre-set, and all the revisions should be made through custom attributes. Since 2Q2011, custom attributes were modified to include the omitted accounts. (2Q2011 has supplemental files to replace the original) Prior to 2Q2011, this is achieved by loan level data (FRBNY and FRBP RADAR group) and added / updated for each quarter before and after. (currently being evaluated for data integrity.) 5% primary samples for 2011 and before, including family members since 2012.
34 Student Loan information : Loan Level Detailed Loan level information on origination date, origination amount, balance, delinquency status, terms/payment, narrative codes (such as payment deferred, collection account, etc), past due amount, scrambled account number and servicer number. Up to 20 accounts from the biggest balance to the smallest. Roll up variables are not restricted by this max number. Useful for calculating originations, payment behavior, consolidations, defaults and accounting for servicer reporting practices.
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36 6000 Preliminary: Student Loan Debt by Current Age
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