Student loan demand at record high
NEW YORK - As lenders continue to curtail access to mortgages, credit cards and other types of loans, one area of the credit market is rapidly expanding: student loans.
Unprecedented growth in student loans over the past two years is raising questions about whether a generation will be saddled with debt before it has even entered the workforce, according to data that the Equifax Inc credit bureau provided exclusively to Reuters.
The number of U.S. student loan accounts has risen 29 percent to 69 million over two years, according to Equifax, while balances have jumped by $105 billion to $527 billion.
We've never seen this high student loan activity, said Dann Adams, president of Equifax's U.S. Information Systems.
The demand for student loans results from college graduates pursuing advanced degrees because of high unemployment. Also, parents' depleted savings mean more college-age children are forced to take on debt.
You have a whole generation of consumers who have never had this debt load, so they're walking into this tough unemployment situation with higher degrees of debt, Adams said. Young adults probably face higher taxes ahead, and a national system overloaded with debt.
The growth in student loans comes as other types of credit are drying up. A higher savings rate means less demand for credit, while supply is down as lenders increasingly target only the lowest-risk borrowers with strong credit scores.
Credit card issuers are closing accounts and cutting credit lines. Since July 2008, credit lines are down by $800 billion to about $2.8 trillion, while account totals have fallen by 95 million to 340 million.
The number of U.S. auto loans, meanwhile, is down almost 5 million from their 2007 peak, to below 57 million, while balances have fallen by $100 billion to less than $700 billion.
Home equity accounts and credit lines are also down.
CONSUMERS UNDER PRESSURE
These trends amount to credit rationing, according to Equifax, which provides consumer data to banks and other lenders.
We have a lot of customers talking about going back more aggressively into the lending market, but as of yet we have not seen it, Adams said. He cited this month's quarterly reports from JPMorgan Chase and Citigroup Inc as evidence of caution among lenders.
Tighter lending standards help explain why delinquency rates on some types of credit have leveled out or begun to decline. Early-stage delinquencies are down year-over-year for all major industry groups except student loans, Equifax said.
However, late-stage mortgage delinquencies -- bills 120 days past due and likely to result in write-offs -- continue to climb. Credit card and home equity line delinquencies are rising, but at a slower rate.
The numbers show U.S. consumers remain under pressure despite evidence of a rebounding economy, stabilizing labor markets and firmer demand for housing. With higher savings rates and less available credit, consumers may not bounce back as quickly as they did in past economic recoveries, which could also limit the scope of any employment recovery this year.
CREDIT STILL TIGHT
The report is based on Equifax's more than 200 million files of U.S. consumers using credit.
Among its other findings:
* Total U.S. consumer debt outstanding is down $500 billion from a year ago to $11 trillion, back at levels last seen in September 2007, before the recession.
* Among U.S. homeowners with mortgages, 7.9 percent were at least 30 days late on payments in December, down 10 basis points from the month before, but still near historic highs. The average delinquent balance is $189,000, compared with $136,000 three years ago.
* The number of new credit card accounts opened in the first 10 months of 2009 fell 45 percent from a year earlier. Consumers with credit scores of 740 or above now get almost half of new cards, up from 36 percent two years ago.
* The average card credit limit is down to $4,060, from about $5,000 in each of the past two years.
* Personal bankruptcy filings rose 34 percent in 2009 to 1.4 million, with Chapter 7 liquidation filings accounting for 71 percent of the total.
(Reporting by Nick Zieminski; Editing by Lisa Von Ahn)