Resumption of Student Loan Payments Caught Two-Thirds of Borrowers by Surprise; More Consumers Say Household Finances Worsening, Though Better than a Year Ago
02 November 2023 - 1:00PM
Two in three consumers (65%) with a student loan said they were
caught by surprise when the U.S. Department of Education announced
this summer that student loan repayments would begin once more in
October 2023. TransUnion’s (NYSE: TRU) Q4 2023 Consumer Pulse study
found that 49% of student loan borrowers expected the resumption to
occur in 2024, with another 14% believing it would happen in 2025
or beyond. The Q4 2023 Consumer Pulse study is based on a survey of
3,000 American adults between September 27 and October 9, 2023.
The resumption of student loan payments coincides with more
Americans stating their household finances are worse than planned
compared to last quarter (40% in Q4 2023 vs. 35% in Q3 2023). At
the same time, more consumers today (31%) say their finances are
better than expected versus one year earlier (23% in Q4 2022).
Nearly six in 10 consumers (56%) also remain optimistic about
their household finances in the next 12 months, the same level
observed in Q3 and higher than the 52% seen in Q4 2022. Similar to
recent quarters, inflation for everyday goods is the No. 1
household financial concern, with 79% of survey respondents ranking
it as one of their top three. A recession (48%), rising interest
rates (44%), increased housing prices for rent or mortgage (42%),
jobs (30%) and stock market volatility (30%) followed.
“Our newest Consumer Pulse study reveals different insights
based on how the consumer sentiment data are viewed. We primarily
view such data on a year-over-year basis to ensure seasonality is
considered. In this regard, consumers are more optimistic about
their household finances and said they are generally performing
better financially than they did at the end of 2022,” said Charlie
Wise, senior vice president and head of global research and
consulting at TransUnion. “For this quarter, it’s clear that the
resumption of student loan payments – while an obligation impacting
only a fraction of US consumers – could be playing a role in
limiting optimism in the short-term for some consumers.”
Among those consumers with student loans coming due this fall,
57.6% plan to make all monthly student loan payments in full, 29.6%
expect to pay partial amounts and 12.8% said they do not plan on
making payments.
TransUnion conducted an earlier analysis about student loan
borrowers that found as of May 31, 2023, 40.6 million consumers
possessed student loans, totaling $1.6 trillion in balances, of
which the large majority were federal student loans that were in
the pandemic-related payment moratorium. From this group, 26.8
million consumers, holding federal student loan debt totaling $1.1
trillion, were expected to be faced with a resumption of payments,
some, particularly recent graduates, for the first time ever.
“After over three years without required student loan payments,
it’s not shocking that a majority of these borrowers were surprised
when they learned that these loans would require monthly payments
in 2023,” said Liz Pagel, senior vice president and consumer
lending business leader at TransUnion. “Many of these borrowers
took on additional loans, including new credit cards and other
credit products, during the payment pause. While their total debt
loads have risen, it’s positive to see that nearly nine in 10 plan
on making full or partial payments on their student loan
debts.”
Millennials Powering the Way
The Consumer Pulse study found that Millennials were the
generation with the most Federal student loan repayments. Yet, this
generation is the one best positioned to make these payments. While
31% of consumers said their finances are better than expected
compared to one year earlier, this percentage rocketed to 52% for
the Millennial generation. Only 30% of Millennials stated their
finances are worse than 12 months earlier, a net positive of
22%.
This net positive was the highest of any generation, with Gen Z
next with a net of 7% (37% better; 30% worse). Conversely, Gen X
was a net negative of -26% (24% better; 50% worse) and Baby Boomers
were -29% (15% better; 44% negative).
A likely reason why Millennials are generally in a better
position? Nearly seven in 10 (69%) expect income increases over the
next 12 months. This compares to 51% for all consumers surveyed. As
well, more than half of Millennials (53%) say their income is
keeping up with the rate of inflation whereas Gen Z (44%), Gen X
(26%) and Baby Boomers (21%) lag. At the same time, Millennials are
most credit hungry with 53% expecting to apply for new
credit/refinance existing credit in the next year – much higher
than Gen Z (44%), Gen X (31%) and Baby Boomers (10%).
“There are more than 70 million Millennials in the U.S. and they
comprise the largest segment of all generations. Their continued
success in the consumer credit market is a key area to watch in the
coming quarters. With a steady flow of income and a healthy
appetite for credit, Millennials can be a major force in driving
the U.S. economy,” concluded Wise.
For more information about the Consumer Pulse study, please
click here.
About TransUnion (NYSE:TRU)
TransUnion is a global information and insights company with
over 12,000 associates operating in more than 30 countries. We make
trust possible by ensuring each person is reliably represented in
the marketplace. We do this with a Tru™ picture of each person: an
actionable view of consumers, stewarded with care. Through our
acquisitions and technology investments we have developed
innovative solutions that extend beyond our strong foundation in
core credit into areas such as marketing, fraud, risk and advanced
analytics. As a result, consumers and businesses can transact with
confidence and achieve great things. We call this Information for
Good®—and it leads to economic opportunity, great experiences and
personal empowerment for millions of people around the
world.
http://www.transunion.com/business
Contact |
Dave
Blumberg |
|
TransUnion |
Email |
david.blumberg@transunion.com |
Telephone |
312-972-6646 |
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