These days, consumers are generally doing a better job managing their credit, but in some instances, high rates of delinquency and default seem to persist.
The amount of student loan debt written off as being uncollectable rose to a total of $3 billion in the first two months of the year alone, up more than 36 percent from the same total a year prior, which checked in at just $1.9 billion, according to the latest National Consumer Credit Trends Report issued by the credit reporting agency Equifax. Furthermore, balances on all student loans rose more than 14 percent during this period, to $852.7 billion nationwide from February 2012’s total of $746.3 billion. That was due to the number of student loans outstanding climbing to 123 million from 108 million.
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“Driven heavily by economic factors, including unemployed or under-employed consumers going back to school along with the rising cost of tuition, student lending has demonstrated consistent, year-over-year growth,” said Equifax chief economist Amy Crews Cutts. “Continued weakness in labor markets is limiting work options once people graduate or quit their programs, leading to a steady rise in delinquencies and loan write-offs. Many policy options are being discussed regarding how to reduce some of the burden, including graduated payments that reflect the lower starting salaries of new graduates, and improve the performance of these loans.”
Meanwhile, when it comes to home loans, the value of severely delinquent balances on first mortgages remained quite high even as it saw declines in February, the report said. In all, it slipped 23 percent to $375 million, from $490 billion a year earlier, and 65 percent of those balances were opened just prior to the housing bubble bursting, from 2005 to 2007.
Further, consumers also showed a far greater appetite for obtaining new auto loans, as the number held nationwide expanded to 59 million, the most seen in nearly four years, the report said. The total of those loans likewise rose to a 50-month high of $789 billion.
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Consumers who are still having a hard time dealing with debt, delinquency and negative equity may want to reevaluate all aspects of their finances to see if there are any ways in which they may be able to streamline them and turn their credit problems around.