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The MeasureOne Private Student Loan Report

INTRODUCTION

Executive Summary

The semiannual MeasureOne Private Student Loan Report provides data and analytics on private student lending, including repayment and delinquency trends, as well as loan performance activity among borrowers and lenders.  Research in this report reflects data as of Q3 2016 for private student loans and does not include federal student loan data. This installment of the report focuses exclusively on school-certified loans and does not include consolidation loans,  which are typically made to borrowers who no longer attend school and who seek to combine education loans into a single education debt obligation.

Key Research Findings as of Q3 2016

  • The early-stage delinquency rate (30 to 89 days past due) declined by 8.8 percent year over year and stands at 2.7 percent of total loans in repayment. Compared to five years ago, the early-stage delinquency rate has declined by 43.6 percent.
  • Both undergraduate and graduate early-stage delinquencies are at the lowest levels since peaking. For undergraduate loans, Q3 2016 had the lowest rate at 2.8 percent since the peak of 8.7 percent in Q4 2008, a decline of 67.1 percent; for graduate loans, the 1.9 percent rate is lower than the Q4 2009 peak of 4.0 percent, a decline of 52.9 percent.
  • The late-stage delinquency rate (90 days or more past due) declined by 14.9 percent year over year and stands at 1.9 percent of total loans in repayment. Compared to five years ago, the late-stage delinquency rate has declined by 51.4 percent.
  • As with early-stage delinquencies, both undergraduate and graduate late-stage delinquencies are at the lowest levels since peaking. Third-quarter 2016 had the lowest late-stage delinquencies rate at 2.1 percent for undergraduate loans, 71.4 percent lower than the Q2 2009 peak of 7.3 percent. Similarly at 1.2 percent for graduate loans, late-stage delinquencies are 56.0 percent lower than the Q1 2010 peak of 2.7 percent.
  • Annualized charge-offs declined by 20.8 percent year over year and stand at 1.9 percent of loans in repayment, the lowest Q3 charge-off rate since before the financial crisis. By comparison, the charge-off rate five years ago was 4.8 percent, representing a decline of 61.0 percent from Q3 2011 to Q3 2016.
  • Year over year, the percent of loans in forbearance status declined 1.5 percent with a current rate of 2.2 percent; loans in deferment declined 3.2 percent with a current rate of 18.2 percent; and loans in repayment increased 0.4 percent with a current rate of 74.5 percent; the percent of loans in grace status increased 7.1 percent and stands at 5.0 percent.
  • The overall private student loan balance increased by 0.8 percent with undergraduate loans continuing to make up a greater percentage of the overall balance at 86.2 percent compared to graduate loans at 13.8 percent. Of the total, the undergraduate loan balance increased 0.6 percent year over year, and the graduate loan balance decreased 3.8 percent.
  • Private student loan originations in academic year 2016-2017 increased 5.47 percent compared with academic year 2015-2016. Of this total, undergraduate loans account for 88.7 percent and graduate loans account for 11.3 percent.
  • Just over 93.2 percent of undergraduate private student loans included a cosigner in academic year 2016-2017, a rate that has steadily increased since academic year 2008-2009 when it stood at 75.8 percent. Conversely, the proportion of cosigned graduate loans has decreased for three consecutive academic years from AY2012/2013 to AY2014/15 and stands at just over 59.3 percent.

Background 

The data for this report is sourced from the MeasureOne Private Student Loan Consortium, a data cooperative of lenders and holders of private student loans. Members include the six largest student loan lenders and holders – Citizens Bank, N.A., Discover Bank, Navient, PNC Bank, N.A., Sallie Mae Bank and Wells Fargo Bank, N.A. In aggregate, the members of the consortium represent 64.7 percent of all private student loans outstanding in the U.S. Overall, private student loans make up roughly 7.5 percent – approximately $102.3 billion – of total student loans outstanding. The remaining 92.5 percent of the $1.36 trillion in total student loans are federal loans.

KEY PERFORMANCE AND PORTFOLIO METRICS (YEAR OVER YEAR)

2

KEY PERFORMANCE METRICS (RECENT QUARTERS) 3

PORTFOLIO BY PROGRAM TYPE (RECENT QUARTERS) 4

PORTFOLIO BY LOAN STATUS (RECENT QUARTERS) 5

HISTORICAL DELINQUENCY TRENDS AS A PERCENTAGE OF REPAYMENT
6

DELINQUENCY COMPARISONS ACROSS UNDERGRADUATE AND GRADUATE LOANS 7

DELINQUENCY COMPARISONS ACROSS UNDERGRADUATE AND GRADUATE LOANS 8

GROSS CHARGE-OFF RATES BY QUARTER 9

DISTRIBUTION BY LOAN STATUS (BY QUARTER) 10

BALANCE BY LOAN STATUS (BY QUARTER) 11

DISTRIBUTION BY PROGRAM TYPE (BY QUARTER) 12

PROGRAM TYPE (BY QUARTER) 13

PERFORMANCE IMPROVEMENT IN THE LAST FIVE YEARS 14

DELINQUENCY BY ACADEMIC YEAR OF ORIGINATION 15

GROSS CHARGE-OFF RATES BY ACADEMIC YEAR OF ORIGINATION 16

REPAYMENT TRENDS BY ACADEMIC YEAR OF ORIGINATION 17

THE STUDENT LOAN MARKET: OUTSTANDING BALANCES* 18

ORIGINATION VOLUME AND DISTRIBUTION BY PROGRAM TYPE AND ACADEMIC YEAR OF ORIGINATION 19

COSIGNED VS. NON-COSIGNED LOAN DISTRIBUTION BY ACADEMIC YEAR OF ORIGINATION 191

SCHOOL CERTIFICATION BY ACADEMIC YEAR OF ORIGINATION 192

DEFINITIONS

30-89 (% of Repay): Balance of loans that are 30 to 89 days past due on payments, divided by balance of loans in Repayment (Loan Status).

90+ (% of Repay): Balance of loans that are 90 or more days past due on payments, divided by balance of loans in Repayment (Loan Status).

90+ Days Delinquent: A loan that is 90 or more days past due on payments and before it is reported as a charge-off to credit reporting agencies. Also referred to as a “seriously delinquent loan.”

Academic Year: A loan is defined to be originated in an Academic Year, if its first disbursement is between July 1 of a year through June 30 of the following calendar year.

Annualized Charge-off Rates (% of Repay): Gross charge-offs for a quarter divided by the quarter end balance in repayment (Loan Status), multiplied by four (or annualized).

Cosigned Loan: A loan that is cosigned by another responsible party, usually a parent or family member.

Cumulative Charge-off Rates (% of Original Balance): The sum of gross charge-offs for every quarter since disbursement, for each academic year, as a percentage of the total dollars disbursed for the academic year.

Delinquent Loan: An active loan for which payments are required, and for which the borrower is delinquent.

Direct Loans: Educational loans provided by the William D. Ford Federal Direct Loan Program to students and parent borrowers directly through the U.S. Department of Education, rather than through a bank or other lender.

Federal Loans: FFELP, Direct, and Perkins loans.

FFELP: Federal Family Education Loan Program, a program that was discontinued in July 2010.

Graduate Loans: Loans made to borrowers enrolled at least half-time in graduate programs.

Gross Charge-offs: The total dollar amount of the loan that is entirely charged off.

Loan Status: A typical private student loan lifecycle consists of numerous cash flowing and non-cash flowing statuses:

  1. Repayment: for purposes of this report, repayment includes borrowers in school with a repayment obligation (i.e., interest only or minimum payments);
  2. Deferment: payments are not required during the initial in-school period, and during subsequent periods when a borrower returns to school;
  3. Grace: payments are not required during a short period of time following withdrawal/graduation from school (typically at least six months);
  4. Forbearance: payments are temporarily not required for borrowers facing financial hardship.

Original Balance: The net amount disbursed on the loan in a given academic year.

Program Type: Undergraduate or graduate program of study for which the loan was obtained.

Repayment (% of Total): Balance of loans in repayment (Loan Status), divided by total outstanding balance of all loans.

School Certified Loan: A loan for which the school attended by the student certifies the amount of the student’s need and receives loan proceeds directly from the lender.

Undergraduate Loans: Loans made to borrowers enrolled at least half-time in undergraduate programs. These include four-year and less than four-year undergraduate programs.

MEASUREONE METHODOLOGY FOR DATA COLLECTION, VALIDATION AND REPORTING

1.MeasureOne employed a rigorous data definition, collection and validation process to ensure that the data and related metrics provided in the Private Student Loan Report are accurate and consistent across participating lenders.

2.Upon initiation of the project, MeasureOne and the six participants formed a data committee composed of both data professionals and business leaders from the participants. This committee both ensured technical accuracy of the data and provided key decision makers an opportunity to validate the results for reasonableness.

3.MeasureOne went though a detailed, multi-step data collection process:

A.MeasureOne and participants discussed and agreed on data fields to be provided, including agreement on appropriate definitions.

B.MeasureOne provided a mock data file layout to participants.

C.Participants agreed on the formulas to be used to calculate each field and metric.

D.Participants supplied the base input numbers that MeasureOne required in order to calculate each metric.

4.Each participant validated MeasureOne’s calculations of each metric, including the inputs into each calculation.

5.Once the data experts from each participant validated their data set, MeasureOne sent the information to participant’s business leaders, who reviewed the numbers for accuracy relative to other internal data sources.

6.After each participant’s data set was validated, MeasureOne aggregated the participant’s data into a Combined Data Set, and the data experts and business leaders from the participants reviewed the Combined Data Set.

7.When the participants completed their review of the Combined Data Set, MeasureOne required each participant to sign and certify the accuracy of the data via a document called the MeasureOne Data Validation and Certification. Participants represented in writing that:

A.The participant carefully reviewed their specific Data Set and the Combined Data Set, and explicitly confirmed that each data set was materially accurate.

B.The participant explicitly approved incorporation of their data set into the MeasureOne Combined Data Set for final inclusion in the Report and Report’s data supplement.

8.Other Securitized Private Loans: MeasureOne standardized student loan securities data built using publicly available remittance reports, which includes data from Access Group, First Marblehead (the non 144A securitized portfolios that First Marblehead no longer has legal control of the related trusts), Key Corp and other non-profit issuers. It does not include data from the six participants in the report and other bank private student loan holders that did not participate in this report, such as JPMorgan Chase Bank, N.A. and US Bancorp.

9.In order to report the most up-to-date figures in each Private Student Loan Report, MeasureOne checks the historical time series data for each release of the report and the most up-to-date figures are reported. As a result, historical figures in this report may show slight, nonmaterial differences from previous reports.

10.Year over year and the 5 year change metrics are calculated using full precision values and not the rounded values of the underlying metrics displayed in the report. This is a policy MeasureOne adopts to ensure accuracy of the change metrics.

Balances are defined as of quarter end while charge-offs are those that occurred during the entire quarter.

193

December  2016

Dan Feshbach – Chief Executive Officer
Chris Keaveney – President and Chief Credit Officer
Rushali Parikh – Managing Director Products and Operations
Rima Patel – Analyst
Contact: www.measureone.com

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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