WASHINGTON–With the government now resuming collection of federal student loan payments and delinquencies rising, a new analysis from America’s Credit Unions has found 20% of credit union members have student loans through other lenders, totaling more than $430 billion in outstanding loans, and 26% of the national student loan debt.
As the CU Daily has been reporting, numerous analysts have been cautioning credit unions to prepare for many members to start experiencing financial strains as they begin making student loan payments that have been suspended since the pandemic.
In the new Economic Update, America’s Credit Unions’ chief economist, Dawit Kebede, reminds that approximately 80% of borrowers deferred their student loan payments, either partially or fully, when they were given the opportunity to do so during the pandemic.
$270 Billion in Loans
According to Kebede, credit union members with student loans hold $270 billion in loans from their credit union, accounting for 16% of total credit union loan balances this year.
“Looking at the repayment status of these student loans shows credit union members with slightly better performance.” Kebede stated. “About 106,000 credit union members, representing $29 billion of the loans held by credit union members, are at least 90 days past due. However, for broader student loan borrowers, there are about 245,000 individuals with $128 billion that are 90 days past due.”
What that means, Kebede, said, is credit unions’ indirect exposure to risk due to the resumption of collections is slightly lower than other lenders’ expectations.
Increased Use of Credit Cards
“Research shows that most consumers used the pause in student loan payments to spend more, with an increase in credit use on credit cards and auto loans,” Kebede stated. “Credit union members’ credit card balances grew by 8.5% while banks and national credit card saw increases between 25 and 30%.”
