Monday, December 16, 2013

Private Student Loans, Q3 2013

While a small portion of the credit unions industry's loan portfolio is in private student loans, non-federally guaranteed student loans grew by almost 32 percent over the last year to slightly more than $2.5 billion in outstanding private student loans at federally insured credit unions.

However this growth in private student loans caused NCUA to issue a supervisory letter because "private student loans have unique features and risk characteristics that are unlike most other consumer loan products." The supervisory letter notes some of the unique issues associated with private student loans including that student loans have a deferral of repayment; borrowers often have little credit history; and repayment is often dependent on future employment and income.

For example, at the end of the third quarter of 2013, 39.28 percent of all private student loans ($986 million in private student loans) were in deferral status. This was up from 35.3 percent at the end of the second quarter.

Out of the 623 federally-insured credit unions that reported outstanding private student loans in the third quarter, 44 credit unions reported that all of their loans were currently in deferral repayment status.

NCUA reported that $36.2 million in private student loans were at least 60 days past due with a delinquency rate of 1.44 percent at the end of the third quarter. However, the agency is understating the true delinquency rate because it is including loans in deferral status it its calculation. If the delinquency rate is adjusted for loans in deferral status, the delinquency rate jumps to 2.38 percent.

In addition, another $29.8 million in non-federally guaranteed student loans were between 30 days and 59 days past due.

NCUA also reported that the net charge-offs of private student loans was $11.5 million or 0.68 percent of average private student loans. Once again, the net charge-off rate understates the rate of losses on private student loans; because the agency includes loans in deferral status in its calculation.

The following table shows the 25 credit unions with the most delinquent private student and their deferral adjusted delinquency rate.

Read the letter.

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