Rate of delinquent student loans rises 36 percent

educationThe amount of delinquent student loans was $3 billion during the first two months of the year, an increase of more than 36 percent from a year ago, said the latest National Consumer Trends Report form Equifax.

Balances in bankruptcy cases remained level at $.5 billion, according to the report.

The increase in derogatory or charged-off balances is due heavily to economic factors, said Equifax Chief Economist Amy Crews Cutts.

“Driven heavily by economic factors, including unemployed or under-employed consumers going back to school along with the rising cost of tuition, student lending has demonstrated consistent, year-over-year growth,” she said.”Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs. Many policy options are being discussed regarding how to reduce some of the burden, including graduated payments that reflect the lower starting salaries of new graduates, and improve the performance of these loans.”

Other changes in student loan characteristics from February 2012 to February 2013:

— Balances outstanding on student loans increased more than 14 percent, from

$746.3 billion to $852.7 billion.

— The number of student loans outstanding increased nearly 13 percent, from 108 million to more than 123 million.

“Student loans are unique today in that they are the only major form of credit that is not rigorously underwritten on either a past credit-performance basis (such as using credit scores) or ability to pay based in income,” she said.

Other highlights from the most recent data include:

Auto

The most recent data shows that the total number of outstanding auto loans in February 2013 is at its highest level in 45 months, summing to more than 59 million.

Auto loan balances in February 2013 total $789 billion, a 50-month high.

At more than $377 billion, total balances on bank-sourced auto loans are at a five-year high.

Similarly, total balances on loans funded by auto finance companies stand at more than $412 billion through February 2013, a 48-month high.

Home Finance

Severely delinquent balances on home equity lines of credit declined 28 percent from February 2012 to February 2013, from $14 billion to less than $10 billion.

Severely delinquent balances on closed-end home equity loans declined 25 percent from February 2012 to February 2013, from $6.6 billion to $5 billion.

In that same time, severely delinquent balances on first mortgages declined 23%, from $490 billion to $375 billion.

Of note, 65 percent of total severely delinquent balances on first mortgages are tied to loans opened from 2005-2007.

Similarly, 73 percent of delinquent balances on home equity lines of credit were opened in that same time period.