Credit unions continued to increase their role as secondary lenders for college students last year, with their private student loan portfolios growing faster than those of other private lenders and the federal government.
Borrowers requested forbearance on their private student loan payments at a higher rate last fall because of hurricanes and other natural disasters, according to executives of MeasureOne Inc. during an online discussion Wednesday of their semi-annual report on private student loans.
Total student loans increased 6.3% to $1.5 trillion as of Sept. 30, 2017, according to the Fed’s latest Consumer Credit report.
MeasureOne estimates private student loans account for about $113.2 billion, or less than 8% of that total. Its survey includes companies that hold $70.8 billion in student loans, including the six largest originators: Citizens Bank, Discover Bank, PNC Bank, Sallie Mae Bank and Wells Fargo Bank.
Credit unions make up a tiny portion of the remainder not measured in the report, but NCUA data shows the credit union segment is growing faster than federal loans and those in the MeasureOne data.
The portfolio balance for the MeasureOne cohort was $64.2 billion on Sept. 30, down 0.4% from a year ago.
MeasureOne’s private student loan originations for the 2016-2017 academic year’s first quarter, which ends Sept. 30, was $3.3 billion, or 1.2% greater than originations in 2015-2016’s July-through-September quarter, when nearly 40% of originations have taken place in recent years. Private student loan originations in the 2016-2017 academic year ending June 30 rose 4.7% to $8.1 billion.
NCUA data shows credit unions’ student loan portfolios stood at $4.3 billion on Sept. 30, up 14.3% from a year earlier and representing just over 1% of total credit union loans among the 710 credit unions offering student loans. The growth rate was about the same for total loans for these credit unions.
Among the 568,739 borrowers, their average loan was $7,588 in the third quarter, up 4.9% from a year earlier.
The MeasureOne report found its cohort’s delinquency and defaults remained “at near-historic lows with a healthy portion of loans in active repayment,” its report said.
However, the share of loans in forbearance grew to 2.9% — its highest level since it stood at 3% in March 2012. The elective reprieve for economic hardship is often an early indicator of repayment troubles.
Brian Gunn, MeasureOne’s vice president of sales and client services, said that many lenders proactively contacted borrowers in Texas and Florida to offer forbearance after Hurricane Harvey flooded the Houston area after making landfall Aug. 25, and Hurricane Irma ravaged the Caribbean and Florida from Sept. 8-11.
“We believe this is primarily driven by the natural disasters in the Southeast,” Gunn said. “This could be temporary.”
Among credit unions, delinquency rates remained stable at about 1.3% for student loans and 0.7% for total loans. Student loan deferrals rose only 5.9%.
The top 10 student lenders had a sharply higher growth rate for student loans. Their portfolios rose 30.7% to $1.2 billion, while their deferrals rose 23.5% to $342.7 million. The Top 10 were:
- Navy FCU, Vienna, Va. ($8.4 billion in assets, 7.4 million members) had $271.2 million in student loans, more than double the $122.7 million it had a year earlier.
- University of Wisconsin CU, Madison, Wis. ($2.6 billion in assets, 236,283 members) had $158.1 million in student loans, up 18.5%.
- Digital FCU, Boston, ($8.1 billion in assets, 688,664 members) had $155.2 million in student loans, up 15.6%.
- Massachusetts Institute of Technology FCU, Cambridge, Mass. ($544.6 million in assets, 36,089 members) had $109.5 million in student loans, up 4%.
- Harvard University Employees CU, Cambridge, Mass. ($627.4 million in assets, 49,345 members) had $98.4 million in student loans, up 10.5%.
- Pentagon FCU, Alexandria, Va. ($22.8 billion in assets, 1.6 million members) had $89.7 million in student loans, more than triple its $25.2 million a year ago.
- Wright-Patt CU, Dayton, Ohio ($3.9 billion in assets, 349,388 members) had $84.2 million in student loans, up 5.5%.
- Quorum FCU, Purchase, N.Y. ($861.4 million in assets, 84,287 members) had $82.6 million in student loans, down 1.7%.
- Members 1st FCU, Mechanicsburg, Pa. ($3.7 billion in assets, 376,313 members) had $78.6 million in student loans, up 10.4%.
- Elements FCU, Indianapolis, Ind. ($1.4 billion in assets, 95,162 members) had $73.3 million in student loans, down 0.2%.
