LR-area debtors for cars, college slower to repay

Borrowers with student and auto loans in the Little Rock metropolitan area are more likely to be seriously delinquent on their payments than borrowers nationally, according to a report by the Federal Reserve Bank of St. Louis.

In the Little Rock area, 15.3 percent of student-loan balances were seriously delinquent in the fourth quarter of 2015, economists with the bank said. A seriously delinquent loan is one that is 90 days or more past due. Nationally, 11.1 percent of student-loan balances were more than 90 days past due.

The average student loan debt for Little Rock-area borrowers is $25,869, higher than the national average of $25,025, the report said.

About 3.6 percent of Little Rock-area car-loan balances are more than 90 days past due, compared with 3.1 percent of car-loan balances nationally.

The average car-loan debt in the Little Rock area was $14,039 in the fourth quarter compared with $12,197 for such borrowers nationally.

Delinquencies for other loans in the Little Rock area were below the national levels, including home-mortgage loans, home-equity lines of credit and credit card debt, the report said.

Student loans in the Little Rock metropolitan area were selected if the address of the borrower was in the Little Rock area, and it doesn't necessarily mean the borrowers attended colleges in the metro area, Lowell Ricketts, a senior analyst at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, said. Ricketts and Don Schlagenhauf, chief economist at the center, wrote the report.

Per capita income in the Little Rock area is lower than the national average, said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville. That's one explanation for why some Little Rock-area borrowers are late with their payments.

The per capita income in the Little Rock metropolitan area was $40,925 in 2014, compared with $47,615 nationally, according to the U.S. Bureau of Economic Analysis.

"Little Rock and Arkansas per capita income are lower than the national rate," Deck said. "So that makes it much more difficult to find a job that pays back your student debt."

Tuition has risen across the board, whether it's at public or private universities, for undergraduate degrees or a graduate education, Ricketts said.

Still, Deck said, she had no explanation for why the Little Rock delinquency rate on student loans is higher than it is nationally.

For some borrowers overwhelmed with student-loan debt, loan consolidation can be helpful, Ricketts said.

"In the event that a borrower runs into payment difficulties, in August of 2013 income-contingent repayment plans were introduced," Ricketts said. "Those limit the monthly payment to about 10 percent of discretionary income."

Nationally, student-loan debt has been growing faster than any other type of debt. The rate of serious delinquencies for student-loan borrowers has increased steadily since before the recession, which occurred from December 2007 to June 2009.

Delinquencies on student loans also have continued to rise since the recession, said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.

"Thus, rising delinquency rates imply that many young borrowers will find their access to credit and ability to save diminished at the outset of their economic lives," the report said.

The report focuses on borrowers in the 8th Federal Reserve District. The district includes all of Arkansas and parts of six other states: Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. The St. Louis bank is one of the 12 regional Federal Reserve banks in the country.

Per capita debt has been growing in the district since 2013, largely because of loans for vehicles and higher education.

Consumers in the 8th Federal Reserve District are taking longer to pay down their debts than the country as a whole.

Business on 03/05/2016