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Student Loan Balance & Repayment Trends in the FRBNY Consumer Credit Panel

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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

Student Loan Balance & Repayment Trends

in the FRBNY Consumer Credit Panel

Donghoon Lee and Meta Brown June 6th 2012

(2)

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

Student Loan Balance & Repayment Data

(3)

Representative Panel and Household Matching

Unique sample design generating a longitudinal quarterly panel

of individuals and households from 1999-2012.

• 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

CCP/Equifax Sample Design

(4)

Details of the sample design and creating sample weights:

An Introduction to the FRBNY Consumer Credit Panel, Lee and

van der Klaauw, 2010

CCP/Equifax Sample Design

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0 3 6 9 12 15 0 3 6 9 12 15 03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 Mortgage HE Revolving Auto Loan Credit Card Student Loan Other Trillions of Dollars

Total Debt Balance and its Composition

Trillions of Dollars

Source: FRBNY Consumer Credit Panel/Equifax

(3%) (8%) (6%) (72%) (5%) (6%) 2011Q4Total: $11.53 Trillion 2012Q1 Total: $11.44 Trillion

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Source: FRBNY CCP/Equifax 0 100 200 300 400 500 600 700 800 900 1000

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Aggregate student loan balance has grown dramatically over the past 13 years, more than doubling since 2005.

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.

Aggregate Student Loan Trend

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0 5 10 15 0 5 10 15 03:Q1 04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 Credit Card Mortgage Auto Loan HE Revolving

Percent of Balance 90+ Days Delinquent by Loan

Type

Percent Percent

Source: FRBNY Consumer Credit Panel/Equifax

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0 50 100 150 200 250 300 350 0 50 100 150 200 250 300 350 03:Q4 04:Q4 05:Q4 06:Q4 07:Q4 08:Q4 09:Q4 10:Q4 11:Q4

MORTGAGE HELOC AUTO CC STUDENT LOAN OTHER

Billions of Dollars

New Seriously Delinquent Balances by Loan Type

Billions of Dollars

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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, 8.7 2012Q1.

 14% of student loan borrowers have some past due balance.

Student Loan Delinquency Rate

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More students?

Higher balance per student?

Lower repayment rate among past borrowers?

What is driving the growth in balance?

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Source: FRBNY CCP/Equifax 0 5 10 15 20 25 30 35 40 # sl borrower (millions) <30 30-39 40-49 50-59 60+ missing

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Source: FRBNY CCP/Equifax 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

$ SL balance per borrower

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Who are student loan borrowers?

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Source: FRBNY CCP/Equifax 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

$ SL balance per borrower

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Source: FRBNY CCP/Equifax 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00%

Proportion of SL borrowers with 90+ past due balance

(19)

Source: FRBNY CCP/Equifax 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%

90+ delinquent balance proportion

(20)

Who is paying down? Who is accumulating?

(21)

Source: FRBNY CCP/Equifax 0 100 200 300 400 500 600

$ balance, new and old borrowers

(22)

Source: FRBNY CCP/Equifax 0 20 40 60 80 100 120 140 160 180 200

$ balance, new and old borrowers

(23)

Source: FRBNY CCP/Equifax 0 20 40 60 80 100 120 140

$ balance, new and old borrowers

(24)

Source: FRBNY CCP/Equifax 0 10 20 30 40 50 60

$ balance, new and old borrowers

(25)

Source: FRBNY CCP/Equifax 0 2 4 6 8 10 12 14

$ balance, new and old borrowers

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The youngest borrowers

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Source: FRBNY CCP/Equifax 0 100 200 300 400 500 600

Student loan debt in $billions by 2005 age

(28)

Source: FRBNY CCP/Equifax 0 0.005 0.01 0.015 0.02 0.025 0.03 0.035

Preliminary: Per Capita Bankruptcies within 24 months by Age

25 35 45 55 65 75

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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. 40-49 year old borrowers have high and growing delinquency rates. Young student borrowers are accumulating debt at unprecedented

rates and have lost default recourse.

Summary

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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

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• 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)

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• 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)

• 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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0 1000 2000 3000 4000 5000 6000

Preliminary: Student Loan Debt by Current Age

25 35 45 55 65 75

References

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