Late payments on private student loans leveling off

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Late payments on private student loans held at or near post-financial crisis lows at the end of the first quarter, according to MeasureOne.

As of March 31, the early-stage delinquency rate (loans between 30 and 89 days overdue) was just 2.5% of total all private student loans, up five basis points from the same point in 2016. For loans more than 90 days past due, the rate was 1.87%, one tick lower from the year-earlier period.

Late payment have fallen by nearly half since their post-crisis peak five years ago in the first quarter of 2012.

In a report published Thursday, MeasureOne said that delinquency reductions are not being driven by the use of forbearance, which fell to 2.2% of all loans outstanding.

The stable, low delinquency rate is also having a positive impact on chargeoffs, which declined by 4.4% on the year to 2.2%.of total outstanding balance.

MeasureOne obtained its data from a consortium of lenders and holders of private student loans, including Citizens Bank, Discover Bank, Navient, PNC Bank, Sallie Mae Bank and Wells Fargo Bank.

Additionally, the latest report includes nine new data contributors, College Ave Student Loans and eight members from the Education Finance Council. In total, the contributors represent 64.4% of private student loans outstanding in the U.S.

Overall, private student loans make up roughly 7.7% ($108.2 billion) of all student loans outstanding. The remaining 92.3% ($1.3 trillion) of the $.42 trillion in loans are federally guaranteed.

MeasureOne broke out early delinquency rates for undergraduate (2.6%) and graduate school loans (1.8%).

MeasureOne, in cooperation with credit rating agency DBRS, also broke out data for private loans used to refinance both private and federally guaranteed student loans. Since 2013, private lenders such as Social Finance, CommonBond, and Darien Rowayton Bank have been underwriting and securitizing these refinance loans.

In the first six months of the year, issuance in the refi student loan market reached $2.28 billion across six transactions, up 30% from the same time period last year across seven deals. Total issuance in 2017 is on pace to surpass the $3.97 billion issued in 2016.

Refinanced student loans in ABS deals are high-quality assets. More than 80% of securitized refi loans were made to borrowers with graduate degrees. The typical average credit score of borrowers in a pool is around 770, and average borrower incomes are usually well into six figures. Borrowers also have a relatively high monthly disposable income.

For example, borrowers in SoFi’s third securitization this year had an average annual income of $172,521 and an average FICO of 770. They had an average of $7,296 in monthly disposable income and just under 99% of the total pooled loans in active repayment.

No surprise, charge-off rates on securitized refi student loans have remained low as of the end of the first quarter this year. Cumulative charge-offs for 2017 are under 0.03%, and approximately 20% of all charge-offs are a result of the borrower’s death.

Forbearance was 0.4% at the end of the first quarter, though that was marginally higher than the previous quarter.

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