Millennials Beat Student Loan Debt in Three to Six Years | South Salem Real Estate

Consumers ages 18-29 with a student loan in repayment generally are able to gain access to new loans and perform as well or better on those new loans as similarly aged consumers without student loans, according to a new study by TransUnion.  . Furthermore, the study found that in only three to six years, student-loan consumers in their 20s have been observed to pass similarly aged consumers without a student loan in overall loan participation rates on mortgages, auto loans and credit cards.

“Going to school impacts young consumers’ access to credit; while in school, students may be less likely to have a job and generate the income necessary for loan approval. However, most catch up once they leave school-and their ability to catch up has not changed over the past decade,” said Steve Chaouki, executive vice president and the head of TransUnion’s financial services business unit. “Our study demonstrates that consumers in their 20s with student loans in repayment-that is, once they finish school-are in fact able to access credit at levels similar to or better than their peers who do not have student loans.”

The study found that in the years after they start repaying student loans, those consumers have similar new mortgage activity to, and higher new auto and credit card open rates than, their peers without student debt.

The study’s findings may come as a surprise because of the rapid rise in student loan balances. According to TransUnion data, the percentage of consumers ages 20-29 with a student loan has skyrocketed from 32% in 2005 to 52% at the end of 2014. In the last five years alone, student loan balances have increased from $589 billion in Q1 2010 to $1.1 trillion in Q1 2015.

The share of student loans in relation to other products such as mortgages, credit cards and auto loans as part of a the overall loan “wallet” for consumers ages 20-29 has also grown dramatically-increasing from 12.9% in 2005 to 36.8% in 2014, an increase of 186%.

TransUnion observed, on a depersonalized basis, borrowers with student loans who entered repayment from three different timeframes: Q4 2005, Q4 2009 and Q4 2012. Student loans generally enter repayment status six months after students graduate or otherwise end their studies. In other words, students graduating in May or June usually begin to make payments on their student loans in the fourth quarter of the year in which they graduate.

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http://www.realestateeconomywatch.com/2015/05/