Statistics for one quarter don’t make a trend, but a drop in the rate of late payments for student loans in the last three months of 2009 may be a promising sign.
In its first publicly released examination of private student loan payment data, credit reporting agency TransUnion said the ratio of those loans that were 90 days or more past due fell to 6.03 percent in the 2009 fourth quarter, reversing a five-quarter trend.
The fourth-quarter rate dropped from a 6.34 percent late-payment rate in the third quarter.
But compared with the rate of 5.4 percent in the 2008 fourth quarter, late payments jumped.
The ratio’s ups and downs reflect what’s going on with other consumer borrowing like mortgages and credit cards, said Thomas Morrissey, manager of TransUnion’s Analytic and Decisioning Services.
During the past few years, late payments for all three climbed because of the spike in the jobless rate at a time when households carried a lot of debt.
But the fourth quarter drop could mean positive news ahead, because consumers appear to be gaining control over their debt.
Fewer new private student loans were made during the past two years, and a higher number of co-signers on those loans are also likely to reduce the overall delinquency rate this year, he said.
Morrissey noted that private student loans don’t have the same payment flexibility available with federally backed student loans. That means payments, which typically are required starting about six months after leaving school, are not based on income. And banks and other private lenders aren’t as willing to defer or reduce payments when the borrower is struggling to keep up.
TransUnion’s data, which is based on 270 million consumer credit files, shows the average debt per active private student loan account for the quarter was $17,754. The average balance for delinquent student loan accounts 90 days or more past due was $13,033.
There’s a correlation between graduation rates and payment rates, Morrissey said. There’s also some indication that graduation from a four-year school leads to higher payment rates than from a two-year program or professional school.
The highest private student loan delinquency rates in the fourth quarter were in Florida, at 9.44 percent, Mississippi, at 9.09 percent, and Tennessee, at 9.07 percent. Government data shows all three states saw big jumps in unemployment last year.
The lowest delinquency rates for student loans were found in Vermont, at 3.28 percent, New Hampshire, 3.6 percent and North Dakota, 3.75 percent. Unemployment rose in all three states in 2009, but not as sharply as it did nationwide.