Experian: Arkansas among top states with student debt trouble; U.S. student debt ‘bubble” nears $1.4 trillion

A new study by credit reporting giant Experian shows that Arkansas ranks among the top five states with the highest percentage of balances that are more than three months past due as the nation’s student loan debt has climbed to an all-time high this year.

However, Tony Williams, executive director of the Arkansas Student Loan Authority (ASLA), said the latest data compiled by the U.S. Department of Education shows the default rate for Arkansas federal student loan borrowers is improving, although those measures are slightly different than the Experian report.

Still, in Arkansas and across the nation, the Experian report and U.S. Department of Education data show student loan debt is at near crisis level. Several Wall Street analysts and a top Federal Reserve policymaker have warned that the student loan debt crisis could be the next financial bubble to collapse, similar to the 2007 financial crisis when subprime mortgage lending topped $1.3 trillion.

According to new data compiled by Experian, U.S. student loan debt has grown more than $833 billion to reach a record high of $1.4 trillion over the last decade, which is slightly higher than the $1.3 trillion recently cited by the U.S. Department of Education.

AVERAGE ARKANSAS STUDENT DEBT ABOVE $31,000
Experian spokeswoman Kristine Snyder said the credit reporting bureau came up with its student loan report by analyzing data from its consumer credit database and found that 13.4% of U.S. consumers, spanning the Silent Generation to Generation Z, have one or more student loans on file.

“Student loan balances are on the rise, which is a result of the increasing cost of higher education. Even with this number moving upward, the data is showing a decrease of delinquencies, which means that consumers are managing their loan payments better than they have in the past,” said Michele Raneri, vice president of analytics at Experian.

Raneri added that while student loans constitute the largest amount of non-household debt and the fastest growing debt segment, there is a lower percentage of late payments on the loans. According to Arkansas specific data provided to Talk Business & Politics by Experian, whose database includes credit information on nearly all U.S. consumers, 12.8% of the federal student loan borrowers in the state have balances that were 90 days past due, which ranks Arkansas behind only South Carolina, Louisiana and Mississippi at 14.3%, 14.2% and 13.8%, respectively.

Overall, the average Arkansas student loan borrower has 3.7 loans with a balance of $31,217, which is better than the national average of 3.7 loans with $34,099 left to pay. However, that is largely offset by overall debt of $133,390 for federal student loan borrowers in Arkansas, compared to the national average at $101,501. Consumer debt tallies include credit cards, mortgages and other installment loans.

When asked about Experian’s analysis, ASLA’s Williams said he had not seen the report, noting that the actual state-by-state student loan data can be hard to track.

“Experian is apparently analyzing their own data; we do not have access to data related to loans in arrears and I’m not aware of the U.S. Department of Education (USDE) tracking loans in arrears on a state-by-state basis different,” Williams said, adding that “In arrears” and “in default” are similar but different tracking methods.

WORK TO LOWER ARKANSAS DEFAULT RATE
The ASLA director said Arkansas’s cohort default rate has trended in a positive direction over the last three years, and is expected to continue on that same trajectory when ASLA gets new data from the U.S. Department of Education next month.

“In past years Arkansas typically ranked 49th in the country. We have been ranked 42nd or 43rd the last three years and we are hopeful that we will be ranked below 40th in the country when the most current data is released,” he said.

During the same period, Arkansas default rate has decline from 19% in 2010 to 14% in 2013, which is still well above the national default rate of 11.3% in the same year. Williams said ASLA began a default management program in early 2013, tracking and counseling student loan borrowers after they leave school.

“We currently work with 14 Arkansas colleges and universities and have been able to significantly lower each school’s default rate,” he said.

Statewide, ASLA’s data compiled by the U.S. Department of Education shows there was $639.2 million in federal student loans that originated in Arkansas during the 2015-2016 academic year, the most recent statistics from the federal government. That is the lowest level of federal student loan origination in Arkansas since the 2008-2009 academic year, when there was $571.1 million borrowed by students to attend university and colleges across the state. The highest level of federal student loan origination in the last decade occurred during the period between 2009 and 2015. Federal student loan origination topped out at $701.3 million in the 2011-2012 academic year, followed by $679.7 million and $675.5 million the 2010-2011 and 2013-2014 academic years, respectively.

By far, college-goers attending the University of Arkansas at Fayetteville received the largest portion of federal student loan proceeds in the 2015-2016 academic years, when $103.5 million was handed out to Arkansans attending the state’s largest university. That amount was up 1.9% from the $101.6 million in federal student loans handed out in the prior year.

After the UA, Arkansas State University in Jonesboro received the second-largest share of federal student loans at $83.2 million in the 2015-2106 academic year, followed by the University of Central Arkansas and the University of Arkansas at Little Rock at $53.8 million and $53.3 million, respectively. The University of Arkansas for Medical Sciences rounded out the top five with $50.6 million in federal student loans, according to the latest data from the U.S. Department of Education.