Consumer Credit Rises in November

Data released by the Federal Reserve Board indicates that consumer credit outstanding rose at a seasonally adjusted annual rate of 4.8% in November. The amount of consumer credit outstanding now totals $3.1 trillion.

The November expansion of consumer credit outstanding mostly reflects a 6.4% increase in non-revolving debt. Non-revolving debt outstanding, which is largely composed of student loan and auto debt, now totals $2.2 trillion. Revolving debt, which is largely composed of credit cards, also contributed to the expansion in total consumer credit outstanding, rising by 0.6% over the month of November. There is $857 billion in revolving credit outstanding.

An earlier post illustrated that the rise in student loan debt largely accounts for the expansion in total consumer credit outstanding. As Figure 1 illustrates, the expansion of student loan debt outstanding coincides with an increase in the amount of student loan debt that is 90 or more days delinquent, considered serious delinquency. Seriously delinquent student loan debt is rising partly because the amount of student loan debt outstanding is growing. But as Figure 2 illustrates, the rate of serious delinquency is also increasing. In recent quarters the serious delinquency rate has spiked, even as the serious delinquency rate for other consumer credit products has declined.

In the fourth quarter of 2011, the share of outstanding student loan debt that was seriously delinquent stood at 8.5%. One year later, that share rose to 11.7%. It is currently 11.8%. At the same time, the shares of seriously delinquent auto and credit card debt are falling from their recession-era highs. Figure 3 illustrates that the amount of seriously delinquent student loan debt is now nearly twice the amount of seriously delinquent credit card debt and roughly 4 times the amount of auto loan debt.

A rising serious delinquency rate will limit homeownership among younger households. According to the Federal Reserve Bank of New York (see p. 18 of linked .pdf), student loan borrowers between the ages of 25 and 30 that are seriously delinquent on their student loan debt typically account for less than 2.0% of new mortgage originations extended to student loan borrowers in this age cohort.

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