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Educational Lending - US - October 2016

"As the student loan situation worsens, more people are questioning whether their college education was worth the money they borrowed to get it. This is beginning to goad aspiring students into exploring other ways to get their degree, such as going part-time or attending a less expensive two-year school before transferring to a four-year school. An increase in people making these decisions may slow down the rate increase in borrowing even more."

Robyn Kaiserman, Senior Financial Services Analyst

This report looks at the following areas:

  • Almost half of Millennials have student loan debt
  • Few understand their obligations
  • Repayment is challenging borrowers' futures

The issue of student loans continues to plague parents and students alike. The total amount of student loans is now almost $12.3 trillion and, though the rate of growth has slowed, the total amount grows each year. As the student loan situation worsens, more people are questioning whether their college education was worth the money they borrowed to get it. This is beginning to goad aspiring students into exploring other ways to get their degree, such as going part-time or attending a less expensive two-year school before transferring to a four-year school. An increase in people making these decisions may slow down the rate increase in borrowing even more.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Almost half of Millennials have student loan debt
            • Figure 1: Have outstanding student debt, by generation, July 2016
          • Few understand their obligations
            • Figure 2: Understanding and repayment of loan, July 2016
          • Repayment is challenging borrowers’ futures
            • Figure 3: Repayment plans, July 2016
          • The opportunities
            • Financial advice would help
              • Figure 4: Repayment plans, July 2016
            • Credit discounts may help borrowers overcome hesitation
              • Figure 5: College loans affect credit decisions, by generation, July 2016
            • Cross-selling opportunities
              • What it means
              • The Market – What You Need to Know

                • Total student loan debt
                  • Student loan default rates are higher than any other type of loan
                    • Scholarships and grants cover one third of cost
                      • Parents are paying a smaller percentage of college costs
                        • A decrease in the youngest populations
                          • Unemployment is going down, especially for college graduates
                            • Large wage discrepancy between high school and college graduates
                            • Market Size

                              • Total student loan debt
                                • Figure 6: Total student debt, Q1 2006-Q1 2016
                              • Student loan default rates are higher than any other type of loan
                                • Figure 7: Percentage of balance 90+ days delinquent, Q1 2006-Q1 2016
                            • Market Breakdown

                              • Auto loan growth surpasses student loan growth
                                • Figure 8: Consumer debt by type, total amount, and percentage of total debt, Q1 2011-Q1 2016
                              • Scholarships and grants cover one third of cost
                                • Figure 9: Typical family’s college funding sources, Academic year 2015-16
                              • Parents are paying a smaller percentage of college costs
                                • Figure 10: Typical family’s college funding sources, by percentage, Academic year 2010-11 through Academic year 2014-15
                              • Federal loans are down; nonfederal are up
                                • Figure 11: Federal vs. nonfederal loans, AY 2010-11 – AY 2014-15
                              • Other sources of funding
                                • Figure 12: Role of various borrowed funding sources, 2016
                            • Market Factors

                              • A decrease in the youngest populations
                                • Figure 13: Populations aged 0-24 as a percentage of the total population, 2011-21
                              • The cost of college continues to grow
                                • Figure 14: Average college tuition and fees, 2000-01 – 2015-16
                              • Number of college students is increasing
                                • Figure 15: Number of students enrolled at four-year institutions, by enrollment status, 2000-24
                                • Figure 16: Number of students enrolled at two-year institutions, 2000-24
                              • The number of female students continues to grow
                                • Figure 17: Number of students enrolled in degree-granting institutions, by gender, 2000-24
                              • Unemployment is going down, even among college graduates
                                • Figure 18: Unemployment rate, March 1, 2012 – March 1, 2016
                              • Large wage discrepancy between high school and college graduates
                                • Figure 19: Median annual wages for workers with high school diploma vs. bachelor’s degree, Jan. 1, 2011 – Jan. 1, 2015
                              • Growth of 529 College Savings Plans
                                • Figure 20: Assets in 529 plans, 2009-15
                                • Figure 21: Number of 529 College Savings Accounts, 2009-15
                            • Key Players – What You Need to Know

                              • Inceptia creates online federal loan information course
                                • New place to lodge consumer complaints
                                  • Discover pays $18.5 million fine
                                    • Deceived students are seeking loan forgiveness
                                      • Colleges lower tuition – But it might not help
                                        • Amazon Prime partners with Wells Fargo
                                          • Wealthfront offers robo-adviser for college savings
                                          • What’s Working?

                                            • Loan refinancing is growing business
                                              • Inceptia creates online federal loan information course
                                                • New place to lodge consumer complaints
                                                • What’s Struggling?

                                                  • Discover pays $18.5 million fine
                                                    • Deceived students are seeking loan forgiveness
                                                      • Colleges lower tuition – But cut aid
                                                        • Figure 22: Chose college based on size of loan, by generation, July 2016
                                                    • What’s Next?

                                                      • Amazon Prime partners with Wells Fargo
                                                        • Wealthfront offers robo-adviser for college savings
                                                        • The Consumer – What You Need to Know

                                                          • Millennials are most likely to have debt
                                                            • Hispanics are more likely to have student debt
                                                              • Most have balances less than $50K
                                                                • Most borrow in line with their income
                                                                  • Women understand loans – But it is harder for them to keep up
                                                                    • Men are more likely to default
                                                                      • Loans affect decisions on future
                                                                        • Men are more positive
                                                                          • Parents are as important as students . . . and vice versa
                                                                          • Outstanding Loan Debt

                                                                            • Young women are less likely than young men to take loans
                                                                              • Figure 23: Had student loans, by gender and age, July 2016
                                                                            • Millennials are most likely to have debt
                                                                              • Figure 24: Have outstanding student loan debt, by generation, July 2016
                                                                            • Household income doesn’t have much effect
                                                                              • Figure 25: Have outstanding student loan debt, by household income, July 2016
                                                                            • Hispanics are more likely to have student debt
                                                                              • Figure 26: Have outstanding student loan debt, by race and Hispanic origin, July 2016
                                                                            • Parents of young children have more student debt than nonparents
                                                                              • Figure 27: Have outstanding student loan debt, by parental status, July 2016
                                                                          • Total Amount of Loan(s)

                                                                            • More have balances less than $50K
                                                                              • Figure 28: Total amount of outstanding student loans, July 2016
                                                                            • Men owe more than women
                                                                              • Figure 29: Total amount of outstanding student loans, by gender, July 2016
                                                                            • Older Millennials owe more
                                                                              • Figure 30: Total amount of outstanding student loans, by generation, July 2016
                                                                            • Most borrow in line with their income
                                                                              • Figure 31: Total amount of outstanding student loans, by household income, July 2016
                                                                          • Understanding and Repayment Plans

                                                                            • Women have a better understanding than men
                                                                              • Figure 32: Understanding of loans, by gender, July 2016
                                                                            • Loans are more of a hardship for women
                                                                              • Figure 33: Loan payments, by gender, July 2016
                                                                            • Men are more likely to default
                                                                              • Figure 34: Loan repayment plans, by gender, July 2016
                                                                            • Those with lower balances more likely to understand terms
                                                                              • Figure 35: Understanding of loan terms, by amount of loan balance, July 2016
                                                                            • More with higher loan balances plan action
                                                                              • Figure 36: Loan repayment plans, by amount of loan balance, July 2016
                                                                          • Effect of Loans on Behavior

                                                                            • Loans affect decisions on future
                                                                              • Figure 37: Effect of loans on students’ decisions, July 2016
                                                                            • Loans have more effect on men’s decisions than on women’s
                                                                              • Figure 38: Effect of loans on students’ decisions, by gender, July 2016
                                                                            • Large loans affect career decisions
                                                                              • Figure 39: Effect of loans on students’ decisions, by size of loan, July 2016
                                                                          • Source of Information

                                                                            • Websites used more by those with smaller loans
                                                                              • Figure 40: Source of information about loans, by amount of loan, July 2016
                                                                            • Men are easier to reach than women
                                                                              • Figure 41: Source of information about loans, by gender, July 2016
                                                                          • Experience and Attitudes toward Student Loans

                                                                            • Men are more positive
                                                                              • Figure 42: Lending attitudes/experience, by gender, July 2016
                                                                            • Women need more information
                                                                              • Figure 43: Satisfaction with loan education, by gender, July 2016
                                                                            • Parents are as important as students . . . and vice versa
                                                                              • Figure 44: Parents should be involved, by household income, July 2016
                                                                              • Figure 45: Discover direct mail ads, 2016
                                                                            • Parents should be involved, especially when loans are large
                                                                              • Figure 46: Parents should be involved, by size of loan, July 2016
                                                                          • Appendix – CHAID Analysis

                                                                            • Methodology
                                                                              • High earning young people are good targets for advisors
                                                                                • Figure 47: Have outstanding student loan debt – CHAID – Tree output, July 2016
                                                                                • Figure 48: Student loan debt– CHAID – Table output, July 2016
                                                                            • Appendix – Data Sources and Abbreviations

                                                                              • Data sources
                                                                                • Consumer survey data
                                                                                  • Direct marketing creative
                                                                                    • Abbreviations and Terms
                                                                                      • Abbreviations
                                                                                        • Terms
                                                                                        • Appendix – Market

                                                                                            • Figure 49: Total US population by age, 2011, 2016, 2021

                                                                                        Companies Covered

                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                        Educational Lending - US - October 2016

                                                                                        £3,199.84 (Excl.Tax)