Delinquency and charge-off rates for private student loans are improving, and are the lowest since before the 2008 financial crisis, according to research released Friday by MeasureOne, a data and analytics firm.
Private student loans are credit-based loans underwritten by lenders who assess ability to repay, among other factors, before deciding to lend.
The delinquency rate for private student loans stood at 4.4% at the end of the first quarter, according to MeasureOne.
The rate for private loans 30 to 89 days past due was 2.5% of total loans in repayment at the end of the first quarter, a year-over-year decline of 9%.
The delinquency rate for private loans 90 days or more past due fell by 16.8% year over year, and stood at 1.9% of total loans in repayment.
By comparison, 11% of all public and private student loans, excluding those in deferment or forbearance, were delinquent 90 days or longer at the end of the quarter, according to Morningstar, which reported that student loan debt is the only kind of household debt that has inreased since the financial crisis.
The report on private loans was based on data from the MeasureOne private student loan consortium, a data cooperative of lenders and holders of private student loans comprising the six biggest student loan lenders and holders. These represent some two-thirds of U.S. private academic lending activity, about $67.3 billion.
Overall, private student loans make up about 7.5% of total student loans outstanding — approximately $102 billion, according to MeasureOne. The remaining 92.5% of the $1.4 trillion in total student loans are federal loans.
The new report focused exclusively on school-certified loans, MeasureOne said. It did not include consolidation loans, whereby borrowers no longer attending school seek to combine education loans into a singled education debt obligation.
The 30-to-89 day delinquency rate for undergraduate loans was 2.6% at the end of the first quarter, compared with 1.6% for graduate loans, while the rate of loans 90 days delinquent or longer was 2.1% vs. 1.1%.
Annualized charge-offs declined by 17.7% year over year to 2.3% of loans in repayment, the lowest first quarter charge-off rate since before the financial crisis, MeasureOne said.
This compared with the charge-off rate of 5.1% in the first quarter of 2011. The research showed that borrowers are using forbearance judiciously, with 2.2% of private student loans in forbearance, a year-over-year decline of 4.1%.
Forbearance refers to a borrower-requested status in which no payments are being made, but interest accrues.
Virtually all private student loans have received school certification, in which the institution verifies actual funds needed and receives the funds on the student’s behalf. According to the report, all the active originating lenders in the consortium require school certification as a core part of their private loan programs, believing this acts as a protection against overborrowing by matching costs to funding.
Higher school certification rates directly correlate to improved loan performance and repayment rates, the report said.
MeasureOne noted that roughly 94% of undergraduate private student loans included a co-signer in the 2015–16 academic year, as did 61% of graduate private student loans. Most co-signers were parents and other close family members.
Co-signers, the report said, enable lenders to extend credit they would otherwise be reluctant to extend, based on documented ability to repay and support repayment of the loan obligations.
“The data speaks for itself and shows that most families with private student loans are paying on time, selectively using forbearance and avoiding default,” Chris Keaveney, president and chief credit officer for MeasureOne, said in a statement.
Keaveney said the fact that repayments were rising while use of forbearance was declining showed that the private student loan business was in good health.