The CFPB Is Coming! The CFPB Is Coming! NCHER Knowledge Symposium
NCHER Legislative Conference September 26, 2013 Meta Brown, Federal Reserve Bank of New York Student...
-
Upload
daryl-dorsett -
Category
Documents
-
view
218 -
download
2
Transcript of NCHER Legislative Conference September 26, 2013 Meta Brown, Federal Reserve Bank of New York Student...
NCHER Legislative Conference September 26, 2013
Meta Brown, Federal Reserve Bank of New York
Student Debt Overview
The views presented here are those of the author and do not necessarily reflect those of the
Federal Reserve Bank of New York, or the Federal Reserve System
2
FRBNY’s 2013Q2 Household Debt and Credit Report was released in mid-August.
Student debt grew by $8 billion (0.8 ppt) to $994 billion.
This is a slower rate of growth than 2012Q4 – 2013Q1 (2.1 ppt), but similar to 2012Q1-2012Q2 (1.1 ppt). In general, Q1-Q2 is a slower growth period for (credit reporting of) student debt.
Overall consumer debt fell by $79 billion, or 0.7 ppt, to $11.15 trillion. (Peak $12.68 trillion)
Housing debt fell: Mortgage -$92 billion (1.1 ppt – transfer of servicing); HELOC -$12 billion (2.2 ppt)
Non-housing debt rose: SL; Credit card +$8 billion (1.2 ppt); Auto +$20 billion (2.5 ppt)
Recent Household Balance Sheet Developments
3
Higher education is crucial to improving the skill level of American workers, especially given rising income and employment gaps between high school and college graduates.
With growing enrollment and rising tuition, student loans play an increasingly important role in financing higher education.
Rapid growth in the prevalence of student borrowing, and aggregate student debt balances approaching $1 trillion, have attracted attention from policymakers, the media, and the public.
We describe the historical and current situation of student debt and discuss its implications for borrowers and the economy.
Higher Education and Student Debt
4
The findings discussed here are based on the FRBNY Consumer Credit Panel (CCP) – a representative sample of consumer credit data that the New York Fed acquired from Equifax.
The CCP contains borrower-level information on student loan balances and payment status, along with other types of household debt
– but no federal vs. private student loan distinction.
Details are available in Donghoon Lee’s press briefing, available via http://www.newyorkfed.org/regional/householdcredit.html
Lee, Wilbert van der Klaauw, Joelle Scally, Andrew Haughwout, and David Yun regularly update information on student loan borrowers and related household debt on our public website. http://www.newyorkfed.org/householdcredit
Data: FRBNY Consumer Credit Panel (CCP) / Equifax
for internal use only
Part 1: Growth of Student Loans
5
6
Total student loan balances by age groupincreasing across all age groups
2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
500
600
700
800
900
1,000
under 30 30-39 40-49 50-59 60+
33%
Billions of Dollars
17%
12%
5%
33%
Source: FRBNY Consumer Credit Panel / Equifax
7
Non-mortgage balances
Student debt is the only kind of household debt that continued to rise through the Great Recession.
Now the second largest balance after mortgage debt.
Source: FRBNY Consumer Credit Panel / Equifax
0
100
200
300
400
500
600
700
800
900
1000
0
100
200
300
400
500
600
700
800
900
1000HELOC Auto Loan Student Loan Credit Card
Billions of Dollars Billions of Dollars
8
Number of borrowers and average balance per person
20042005
20062007
20082009
20102011
20120
10
20
30
40
Number of borrowers
Mill
ion
s
Each increased by 70% between 2004 and 2012 (7% per year)
Source: FRBNY Consumer Credit Panel / Equifax
20042005
20062007
20082009
20102011
20120
5,000
10,000
15,000
20,000
25,000
Average balance per borrower
9
Distribution of student loan balance, 2012:Q4
40% of borrowers have balances less than $10,0003.7% of borrowers have balances greater than $100,000
39.9%
29.8%
17.7%
9.0%
2.2% 0.9% 0.6%
$1-10,000$10,000-25,000$25,000-50,000$50,000-100,000$100,000-150,000$150,000-200,000$200,000+
Balance
Source: FRBNY Consumer Credit Panel / Equifax
10
Student borrowing increasingly prevalent
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0
5000
10000
15000
20000
25000Student debt prevalence and mean among 25 year olds
Proportion of 25 year olds with student loans, left axis
Mean student loan debt among borrowers at 25, right axis
for internal use only
Part 2: Student Debt Delinquency
11
12
6.7 million borrowers, or 17%, are 90+ days delinquent.30-49 year olds have higher delinquency rates.
Source: FRBNY Consumer Credit Panel / Equifax
age<30 age 30-49 age 50+ all0%
5%
10%
15%
20%
25%
30%
35%
40%
2004 2008 2012
Share of borrowers 90+ days delinquent (incl. default)
13
not in re-
pay-ment: bal-ance the
same14%
not in repayment: balance up
30%
Borrower repayment status, 2012:Q4
About 44% of borrowers are not yet in active repayment due to deferments and forbearances.
Another way to look at the delinquency rate is to consider only those in active repayment and remove those who are not in repayment from the denominator…
in re-pay-
ment: balance delin-quent17%
in re-pay-
ment: balance
not delin-quent39%
Source: FRBNY Consumer Credit Panel / Equifax* Repayment status is defined using the quarterly change in balance and the current payment status.
14
Delinquency rates higher among borrowers in repayment
Source: FRBNY Consumer Credit Panel / Equifax
age<30 age 30-49 age 50+ all ages0%
5%
10%
15%
20%
25%
30%
35%
40%
Share of borrowers in repayment 90+ days delinquent
2004 2008 2012
age<30 age 30-49 age 50+ all ages0%
5%
10%
15%
20%
25%
30%
35%
40%
Share of borrowers 90+ days delinquent
2004 2008 2012
for internal use only
Part 3: Subsequent Economic Activity
15
16
Young student borrowers retreat from housing marketwith coauthor Sydnee Caldwell
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.2
0.22
0.24
0.26
0.28
0.3
0.32
0.34
0.2
0.22
0.24
0.26
0.28
0.3
0.32
0.34
Proportion with home-secured debt at age 30
Any student loan debt ages 27-30 No student loan debt ages 27-30
17
Young student borrowers retreat from auto market
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.24
0.26
0.28
0.3
0.32
0.34
0.36
0.38
0.4
0.24
0.26
0.28
0.3
0.32
0.34
0.36
0.38
0.4
Proportion with auto debt at age 25
Any student loan debt ages 22-25 No student loan debt ages 22-25
18
Student borrowing increasingly prevalent
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
0
5000
10000
15000
20000
25000Student debt prevalence and mean among 25 year olds
Proportion of 25 year olds with student loans, left axis
Mean student loan debt among borrowers at 25, right axis
19
Student borrowers deleverage, despite rapid SL growth
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
5000
10000
15000
20000
25000
30000
35000
40000
0
5000
10000
15000
20000
25000
30000
35000
40000
Average total debt at age 25
Any student loan debt ages 22-25 No student loan debt ages 22-25
20
Weakened labor markets
Lowers graduates’ expectations regarding future income
Graduates reign in consumption
Decreased access to credit Underwriting standards tightened in the recession & recovery DTI calculations include larger student loan balances Increased SL delinquency lowers apparent creditworthiness
Consider trends in credit scores for those with and without student debt:
Why the decline in housing & auto market participation?
21
Declining relative credit scores of student borrowers
Source: FRBNY Consumer Credit Panel / Equifax
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012610
615
620
625
630
635
640
645
650
655
660
610
615
620
625
630
635
640
645
650
655
660
Average Equifax risk scores at 25 and 30
Age 25, student loan 22-25 Age 30, student loan 27-30
Age 25, no student loan 22-25 Age 30, no student loan 27-30
22
Higher education is an important investment among young workers, but it is accompanied with a growing student debt burden.
Aggregate student loan balances almost tripled between 2004 and 2012 due to an increasing number of borrowers and higher balances per borrower.
About 17% of borrowers are delinquent on student debt. Adjusting for repayment causes the delinquency rate to rise to over 30%.
Conclusion
23
Young student borrowers appear to have retreated from both housing and auto markets between 2008 and 2012.
Hence, despite rapidly growing student debt balances, they lowered their overall debt from 2008 to 2012.
Lowered earning expectations, tighter underwriting standards, higher DTIs, and decreased creditworthiness may limit the contribution of these skilled young workers to housing and auto market recoveries.
While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace.
Conclusion
for internal use only
APPENDIX
24
25
On our website, we provide: Updates of our Quarterly Report on Household Debt &
Credit ▫ Balances for Mortgages, Credit Card, Auto, & Student Debt▫ Delinquency rates
Spreadsheets:▫ All data featured in the Quarterly Report on Household Debt &
Credit (1999-2013:q1, quarterly)▫ Student loan
– # borrowers, delinquency rates, average balance
– By state (2004-2012, annual) – By age group (2012 only)
Appendix: www.newyorkfed.org/householdcredit