Buried in the earnings statements of financial companies are hints of problems with student loan repayments.
Three of the biggest financial institutions lending money to student — Wells Fargo, Discover, and Sallie Mae — are having some issues with student loans.
According to the New York Fed, there is about $1 trillion in outstanding student loan debt, making it the second personal largest debt only to mortgages, but larger than car loans, credit cards, or home-equity. And delinquencies are fairly high — the official number is around 11% but the New York Fed says that's a low estimate because about half of those loans aren't being currently paid back. Many of them are not technically delinquent but are in grace periods, deferment, and forbearance from lenders and others who service the debt.
Since much of student loan debt is guaranteed (and now even issued by the government), it isn't a huge problem for the banks that still lend to students. But some banks, like JPMorgan, are getting out of the student loan business entirely. And for the financial institutions that still make loans and service them on their own, such as Wells Fargo, Discover, and Sallie Mae, there are some issues popping up.
Wells Fargo
Robert Galbraith / Reuters
One of the largest student lenders, Wells Fargo reported in its third quarter earnings that it has $22.4 billion of student loans outstanding, and $11.3 billion of those are not guaranteed by the federal government. While there was a sizable jump in origination thanks to this quarter covering the beginning of the school year, there was also a corresponding increase in the number of loans that are at least 30 days delinquent: $228 million worth of delinquent loans, just over 2% of its private loan portfolio, which is indicative not of the strength of their new loans but of how well their old ones are performing.
This isn't likely to be a huge problem for Wells: its $11 billion worth of non-guaranteed student loans pales in comparison to, say, its $50 billion worth of auto loans or $1.4 trillion in total assets.
Discover
Steven Senne, File / AP
