Rates of Seriously Delinquent Auto, Student Debt Rise in First Quarter

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Rates of seriously delinquent mortgage debt, credit debt and home equity lines of credit (HELOCs) declined in the first quarter. However, seriously delinquent auto and student debt rose, according to the latest issue of the Quarterly Debt Monitor, written by Don Schlagenhauf, chief economist at the St. Louis Fed’s Center for Household Financial Stability, and Lowell Ricketts, the center’s senior analyst.

Nationally, the rate of seriously delinquency mortgages fell 0.79 percentage points in the first quarter on a year-over-year basis to 1.9 percent. This is down from a financial crisis peak of 7.7 percent in the first quarter of 2010. (To see figures showing the trends in seriously delinquent debt, see the article “Consumer Debt Rises for 10th Quarter in a Row.”)

The authors wrote: “The legacy of the crash continues to wane: Serious delinquency rates declined across all areas over the past year.” The 41 to 55 age group continues to hold the largest amount of seriously delinquent mortgage debt, at 0.8 percentage points.

The rate of seriously delinquent auto debt rose 0.12 percentage points in the first quarter, one of two categories to see an increase. After peaking at around 5 percent in the aftermath of the recession, the serious delinquency rate stood at 3.3 percent in the first quarter. As with mortgages, the 41- to 55-year-old age group held the largest share, at 1.1 percentage points.

Schlagenhauf and Ricketts noted that the serious delinquency rate for credit card loans has reached historic lows for the nation, thanks to significant deleveraging. They wrote: “The number of credit card accounts has substantially declined, and the remaining card users are apparently better able to manage their repayment obligations.”

In the first quarter, the rate of seriously delinquent credit card debt fell 0.56 percentage points on a year-over-year basis. The rate for the nation stood at 7.4 percent, with 41- to 55-year-olds contributing the highest percentage at 2.7 percent.

The rate of seriously delinquent student debt rose 0.12 percentage points in the first quarter on a year-over-year basis. Unlike the other debt categories studied, the group contributing the most to the delinquency rate was the 31- to 40-year-old group, at 3.6 percentage points of the 10.9 percent national rate. The 41- to 55-year-old group contributed the second most at 3.4 percentage points.

Schlagenhauf and Ricketts also noted that the serious delinquency rate for student loans has risen for years. They added: “Making matters worse, the serious delinquency rate likely understates the severity of the problem because many students may be in deferment, forbearance or a grace period before repayment begins. Undoubtedly, some of those borrowers will fall behind on making payments.”

The authors noted that seriously delinquent HELOCs were similar to mortgages in that their rates rose during the recession. However, the rate for HELOCs didn’t peak until close to 2012. In the first quarter, the rate of seriously delinquent HELOCs declined 0.6 percentage points to 1.6 percent. The 41- to 55-year-old age group once again contributed the greatest percentage to the rate, at 0.6 percentage points.

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