Money Talk: Rising student loan debt raises big questions for U.S. economy

Editor’s note: Each Monday, Talk Business & Politics provides “Money Talk,” a wrap-up of banking and financial news. 

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RISING STUDENT LOAN DEBT RAISES BIG QUESTIONS FOR U.S. ECONOMY
The confluence of rising student loan debt, stagnant income growth and tight lending standards facing U.S. millennials raises significant questions for long-term consumption patterns, savings rates and the economy as a whole, says Fitch Ratings. The resulting financial barriers to home ownership in particular could have multiple long-term sectoral and economic implications.

In a recently published report, “Falling Off the Generational Wealth Ladder,” Fitch’s Macro Credit Research team assessed the implications of long-term financial trends pertaining to income, debt and credit conditions for millennials. Fitch believes that the ongoing increases in student debt to record levels, combined with low income growth, could be key factors constraining home ownership and may weigh on long-term consumption growth.

Home ownership rates have been falling since before the financial crisis in 2008-2009. The decline for under-35s has been particularly large, with the rate falling to 34% in 2016 from 41% in 2000, according to U.S. Census data. At the same time, average student debt hit a record – above $30,000 this year – while the number of individuals with student loans reached 42 million, according to the U.S. Department of Education. Income growth has not kept pace with the rise in student loans or housing costs.

U.S. COMPTROLLER EXPLORING ‘SPECIAL PURPOSE’ NATIONAL CHARTER FOR FINTECH COMPANIES
U.S. Comptroller of the Currency Thomas Curry announced on Friday (Dec. 2) his office would move forward with considering applications from financial technology (fintech) companies to become special purpose national banks. During remarks at the Georgetown University Law Center, the Comptroller described considering special purpose national charters for fintech companies was in the public interest, has great potential to expand financial inclusion, will empower consumers, and help families and businesses take more control of their financial matters.

The Comptroller also explained that considering fintech charter applications provides businesses a choice without creating a requirement to seek a charter. Companies that seek a charter are evaluated to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection, and strong capital and liquidity.

Accompanying his decision, the Office of the Comptroller for the Currency (OCC) published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. The paper is available here.

NOVEMBER AUTO SALES TO TOP $45 BILLION
TrueCar Inc. projects U.S. revenue from new vehicle sales reached $45 billion for the month of November, up 1.6% from a year ago. Despite lower average transaction prices, automakers should post a $712 million gain in revenue compared to last year due to two more selling days in November 2016. Average Transaction Prices (ATP) in November 2016 are growing by 1.2% compared to the prior month while showing a loss of 1.9% over the prior year.

Ford and GM are expected to grow by 2.9% and 1.7% in average transaction prices year-over-year, respectively. Volkswagen Group continues to accelerate by 3.1% versus November 2015, a possible indication of continued signs of recovery from the TDI emissions issues a year ago. TrueCar estimates the average transaction price for a new light vehicle was $32,667 in November, down 1.9% from a year ago. Average incentive spending per unit grew by $399 to $3,475. The ratio of incentive spending to ATP was 10.6%, up from 9.2% a year ago.