Student, Auto Loan Delinquencies Rise Slow and Steady, Report Says
Is there reason for concern?
A Morningstar report on debt shows rising delinquencies in student loans and auto loans. While the rate for student loans more than 90 days past due declined to 11.0 percent in the first quarter, from 11.5 percent in the fourth quarter 2015, it has been rising since the end of 2011 when delinquencies were 8.5 percent
This corresponds with the increase in student enrollment at for-profit colleges that target lower income groups with the lure of higher paying jobs. Enrollment in these institutions have quadrupled since 2000 and a study revealed that 70 percent of the students who defaulted on their loans in 2013 went to for-profit educational institutions.
In 2014, 47 percent of students at these institutions defaulted on their loan, compared to 38 percent who went to two-year institutions and 27 percent who did the traditional four-year courses.
The report also warns of rising delinquencies in auto loans propelled by an increase in subprime lending.
The rising competition among lenders lending to millennial borrowers with thin files has led to the uptick in subprime auto loans. Experian reported a 10.9 percent year-over-year increase in the balance of subprime auto loans and leases held by consumers in the first quarter of 2016
Auto delinquencies have crept higher, with the rate of loans more than 90 days late reaching 3.5 percent in the first quarter, up from 3.4 percent in the prior quarter.
“For student and auto loans, it’s important to keep the eyes on the road and watched as these are vulnerable to subprime lending with rising delinquencies,” said Stephanie Mah, director of research at Morningstar and author of this report. “Even though the pace of student-loan delinquencies slowed in the previous quarter, they remain at near record levels..”
Source : http://debanked.com/