ATLANTA (6/28/13)--New credit for student loans for first quarter totaled $15.6 billion, a 20% hike over the $12.9 billion borrowed a year earlier, with the average loan amount increasing 11%, said Equifax's National Consumer Credit Trends Report, which covers March 2012 to March 2013.
New student loans originated rose 3.9%--to 2.8 million from 2.7 million--while the average loan amount increased to $6,242 from $5,518. Consumers who took out at least one student loan in Marched borrowed 6% more--$9,123--compared with $8,636 in March 2012.
"The total number of student loans outstanding has doubled since 2009, and balances owed have nearly doubled," said Equifax Chief Economist Amy Crews Cutts. "This trend was primarily driven by large increases in college enrollments and middle-aged adults going back to school due to the scarcity of available positions," she said.
Students who borrow to fund college also are increasing the amount they owe because of deferrals of interest payments that occur when they leave college without a job or one that doesn't pay enough, she said. "They end up in an income-based repayment plan that doesn't cover the total monthly interest owed."
Federal student loan rates will increase to 6.8% from 3.4% if Congress doesn't intervene by July 1. Those who see their rates rise should consider contacting a credit union for advice on how to limit the impact or to possibly refinance their debts, said the Wisconsin Credit Union League.
"Many credit unions offer private student loans because students deserve reasonable rates as well as an institution that will work with them to manage their short- and long-term finances," said league President Brett Thompson.
"Prudent underwriting and financial guidance to borrowers help credit unions' private student loans perform better than other student loans with a far lower default rate--around 1.6% compared to less than 6% for all private student loans and more than 12% for federal loans," the league said.
The Credit Union National Association's first annual High School Student Borrowing Survey found that more than half of high school seniors have no idea what they will need for college costs. Roughly 83% did not know the rates, and 77% did not know the duration of their expected or existing college loans. Three-fourths of those who planned to go to college said they would need federal and private loans, family money and jobs to support their tuition. One-fourth expected to take out two or more student loans.
The total balance of student loans outstanding increased more than 16% between May 2012 and May 2013, to more than $879.1 billion, Equifax said. Write-offs totaled $9.3 billion last month, a 60.3% increase from one year earlier.