Consumer Credit Outstanding Grows on Auto, Student Loans

Consumer credit outstanding grew by a seasonally adjusted annual rate of 4.5%, $161.0 billion, in the month of April 2016, 5.1 percentage points slower than the 9.6% rate of growth recorded in March. Consumer credit outstanding now totals $3.602 trillion.

According to the Federal Reserve Board’s Consumer Credit Report, the increase in total consumer credit outstanding partly reflected an expansion in the outstanding amount of revolving consumer credit. Revolving credit outstanding, which is largely composed of credit card debt, rose by 2.1%, $19.8 billion, over the month of April. In March, the outstanding amount of revolving credit grew by 13.3%. There is now $952 billion in outstanding revolving credit.

Non-revolving credit was the larger contributor to the expansion in consumer credit outstanding. Non-revolving consumer credit includes auto loans and student loans. According to the report, non-revolving credit outstanding rose by a seasonally adjusted annual rate of 5.4%, $141.2 billion, in April—, 2.8 percentage points slower than its growth rate in March, 8.2%. There is now $2.650 trillion in outstanding non-revolving credit. The total amount of motor vehicle loans outstanding totaled $1.051 trillion, but student loan debt outstanding equaled $1.351 trillion.

Student loans are typically used to pay for education expenses. However, consumers can also use other forms of debt to finance their own education. The Federal Reserve Board’s Survey of Household’s Economic Decision Making (SHED) provides insight into the use of various debt products for the purpose of financing one’s education. According to results using the 2015 iteration of the SHED, the vast majority of consumers with education debt used student loans to finance them while very few used home equity loans or some other debt financing. Meanwhile, a smaller but still sizable number of consumers used credit card debt to finance education costs.

Presentation1

The Federal Reserve’s SHED, produced annually since 2013, evaluates the economic well-being of U.S. households and identifies potential risks to their financial stability. The survey includes modules on a range of topics of current relevance to financial well-being including credit access and behaviors, savings, retirement, economic fragility, and education and student loans.

As illustrated in Figure 1 above, 94% of consumers that borrowed to pay for their own education used student loans. Meanwhile, 21% of consumers that borrowed to pay for their own education used credit cards. A much smaller proportion of consumers borrowed for education expenses using home equity lines of credit or some other type of loan.

Presentation2

Not only do the greatest proportion of borrowers use student loan products, but also the total amount owed on student loans across all borrowers far exceeded the education expenses owed on other types of loan products. As shown in Figure 2, the total outstanding amount of student loans used to finance one’s own education totaled $1.0 trillion. Another $53 billion is borrowed using credit cards while $42 billion in one’s own education expenses is financed using home equity lines of credit. Other types of loans account for $19 billion in education expenses.



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