Latest news with #MicheleRaneri
Yahoo
2 days ago
- Business
- Yahoo
Average Credit Card Debt Is Up By More Than a Quarter: What That Means for Americans' Wallets and the Economy
This decade's historically high inflation rate has pushed more Americans to use credit cards to pay the bills — and many are now delinquent on their payments. If these trends continue, it could bode ill for both personal finances and the U.S. economy, experts say. Read More: For You: The average U.S. credit card debt per borrower rose to $6,371 during the first quarter of 2025, according to TransUnion's latest credit industry insights report. That represents a 26% increase from an average of $5,026 during the first quarter of 2022, when inflation was headed for its highest rate in four decades. GOBankingRates unpacks what these findings mean for Americans' wallets and the economy. On the bright side, the 2025 average credit card debt was up only 2.5% from a year earlier — a slowdown from the annual increases reported in 2024 (8.5%) and 2023 (14%). Total balances across all consumer credit products — including mortgage, auto and personal loans — rose by about 28% from Q1 2020 to Q1 2025. However, when adjusted for inflation, balance growth was closer to 3%. The TransUnion analysis also found that inflation-adjusted balances for consumers declined in real dollar terms across the majority of credit risk tiers from 2020 to 2025. These are positive signs in terms of the rate of debt growth. But it's still worrying that Americans continue to pile up debt in an otherwise decent economic environment where wages are rising and unemployment remains low. Consider This: 'As consumers grapple with rising costs and high interest rates, recent studies have revealed an increased reliance on credit products to help make ends meet,' TransUnion noted. This has been a particular problem for subprime borrowers, according to Michele Raneri, a TransUnion vice president and head of U.S. research and consulting. 'This demographic has likely felt the impact of higher costs most acutely,' Raneri said in a press release. 'But for other risk tiers of borrowers, their card balance growth has been less than the rate of inflation, indicating that many consumers may have further borrowing capacity.' Subprime and low-income borrowers are also more likely to be delinquent on their credit card payments, according to a recent report from the Federal Reserve Bank of St. Louis (FRED). That report, released on May 9, found that the share of people 30 days delinquent on their credit card debt has 'trended upward' since the first half of 2021. But it's more notable in the lowest-income areas than in the highest-income areas. Between the second quarter of 2021 to the first quarter of 2025, their delinquency rates grew by 63% and 44%, respectively. While the pace of delinquency rate growth has slowed since the start of 2024, the fact that it continues to grow at all could signal trouble in the months ahead. 'Delinquency rates, including credit card delinquency rates, may anticipate recessions and provide insight into future U.S. economic conditions,' the FRED report noted. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 Warren Buffett: 10 Things Poor People Waste Money On 10 Cars That Outlast the Average Vehicle This article originally appeared on Average Credit Card Debt Is Up By More Than a Quarter: What That Means for Americans' Wallets and the Economy
CNBC
07-05-2025
- Business
- CNBC
Federal Reserve holds interest rates steady: What that means for credit cards, auto loans, mortgages and more
When the Fed hiked rates in 2022 and 2023, the interest rates on most consumer loans quickly followed suit. Even though the central bank lowered its benchmark rate three times in 2024, those consumer rates are still elevated, and are mostly staying high, for now. Many credit cards have a variable rate, so there's a direct connection to the Fed's benchmark. With a rate cut likely postponed until July, the average credit card annual percentage rate has stayed just over 20% this year, according to Bankrate — not far from 2024's all-time high. Last year, banks raised credit card interest rates to record levels and some issuers said they are keeping those higher rates in place. At the same time, "more people are carrying debt because of higher prices," said Ted Rossman, senior industry analyst at Bankrate. Total credit card debt and average balances are also at record highs. 2. Mortgages Prospective home buyers leave a property for sale during an Open House in a neighborhood in Clarksburg, Maryland. Mortgage rates don't directly track the Fed, but are largely tied to Treasury yields and the economy. As a result, uncertainty over tariffs and worries about a possible recession are dragging those rates down slightly. The average rate for a 30-year, fixed-rate mortgage is 6.91% as of May 6, while the 15-year, fixed-rate is 6.22%, according to Mortgage News Daily. Mortgage rates "are showing signs of life after a slow couple of years," said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. But for potential home buyers, that's not enough of a decline to give the housing market a boost. "Many borrowers are reluctant to take on a loan at today's rates, particularly if they currently have a loan at a significantly lower rate," Raneri said. 3. Auto loans Auto loan rates are tied to several factors, but the Fed is one of the most significant. With the Fed's benchmark holding steady, the average rate on a five-year new car loan was 7.1% in April, while the average auto loan rate for used cars is 10.9%, according to Edmunds. At the end of 2024, those rates were 6.6% and 10.8%, respectively. With interest rates near historic highs and car prices rising — along with pressure from Trump's 25% tariffs on imported vehicles — new-car shoppers are facing bigger monthly payments and an affordability crunch, according to Joseph Yoon, Edmunds' consumer insights analyst. "Consumers continue to face a challenging market, now with added uncertainty of the tariff impact on their next vehicle purchase," Yoon said. "Prices and interest rates remain elevated, and there's no fast or easy answer as to how the tariffs will affect inventory levels — and therefore pricing — as buyers try to make sense of an increasingly complex shopping journey." 4. Student loans Federal student loan rates are fixed for the life of the loan, so most borrowers are somewhat shielded from Fed moves and recent economic turmoil. Interest rates for the upcoming school year will be based in part on the May auction of the 10-year Treasury note, and are expected to drop slightly, according to higher education expert Mark Kantrowitz. Undergraduate students who took out direct federal student loans for the 2024-25 academic year are paying 6.53%, up from 5.50% in 2023-24. Borrowers with existing federal student debt balances won't see their rates change, adding to the other headwinds some now face along with fewer federal loan forgiveness options. 5. Savings While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate. "Continued high interest rates are discouraging for those with debt but awesome for savers," said Matt Schulz, chief credit analyst at LendingTree. Yields for CDs and high-yield savings accounts may not be as high as they were a year ago, but the Fed's rate cut pause has left them well above the annual rate of inflation, Schulz said. Top-yielding online savings accounts currently pay 4.5%, on average, according to Bankrate. "With all of the uncertainty in the economy right now, it makes sense for people to act now to lock in CD rates and take advantage of current high-yield savings account returns while they still can," Schulz said. Subscribe to CNBC on YouTube.
CNN
05-05-2025
- Business
- CNN
Federal student loans are due again. A record percentage of borrowers are seriously delinquent
Source: CNN About 4 million, or roughly one in five, federal student loan borrowers with a payment due are seriously delinquent, according to a new analysis published Monday by TransUnion. Research from the information and insights company suggests that a significant number of Americans with student loan debt are not able to make payments, did not know payments were due or decided not to pay. The findings come as the Department of Education has vowed to restart collecting federal student loans in default starting Monday following a Covid-era pause. TransUnion found that as of February, a record 20.5% of student loan borrowers with a payment due are 'seriously delinquent,' which is defined as 90 days or more past due. (The analysis only includes federal student loan borrowers and only those who are not in forbearance or deferment.) It's a sharp jump from February 2020 — just before the start of the pandemic — when 11.5%, or about 2.6 million, were seriously delinquent. The previous record was set in September 2012 when 15.4%, or about 3.3 million, borrowers were 90 days or more past due. The TransUnion analysis did not determine why a growing share of borrowers are behind on student loan debt. TransUnion cautioned that its finding of one in five student loan borrowers seriously delinquent may actually understate the problem due to the complexity of the issue. The company said that some borrowers appear to be 90 days or more past due but have not yet been reported as seriously delinquent, likely because they are exploring repayment programs and other options. The Covid-era pause on federal student loan payments ended in September 2023, and borrowers were shielded from the negative effects of a missed payment until October 2024. Some student loan borrowers 'may be overstretched' and face a 'difficult financial situation,' Michele Raneri, vice president and head of US research and consulting at TransUnion, told CNN. Indeed, 50.8% of subprime federal borrowers with past-due payments are considered seriously delinquent. 'Borrowers who have not been repaying will likely have to make a number of challenging budgeting decisions,' Raneri said. Raneri cautioned that while some borrowers may be unable to pay, others may not know payments have resumed or even know how to make the payments. Others, she said, simply may not be willing to pay. No matter the reason, falling behind on student loan debt is costly. According to research from the Federal Reserve Bank of New York, new student loan delinquencies have taken a massive bite out of credit scores. Delinquencies have wiped out an average of 87 points for subprime borrowers and 171 points for those with super prime, or excellent, credit scores. TransUnion found a smaller yet still sizable decline of an average of 63 points from credit scores of federal student loan borrowers who owe money and are delinquent. 'This will likely make it harder to get a mortgage and, if they can, will likely result in less favorable interest rates than they may have found previously,' Raneri said. In other words, at a time of already-high interest rates, it will be even more expensive to borrow for those who have fallen behind on student loan debt payments. TransUnion found that roughly 41.9 million people have student loan debt, with the vast majority (39.7 million) owing federal student loans. Roughly 20 million of those with federal student loan debt have had payments deferred or are in forbearance. That leaves about 19.7 million who have owed money on their federal student loan debt over the past three months. Borrowers with weaker credit scores are more likely to fall behind on their federal student loan debt, according to TransUnion's findings. The research found that while 50.8% of subprime borrowers are seriously delinquent, just 0.9% of those with super prime credit scores are behind. Tyler Wickord, a 29-year-old who lives in Southern California, is struggling to pay off his $12,000 in student loan debt. 'It feels like I'm drowning,' Wickord told CNN in a phone interview. 'Knowing I have student loan debt to pay along with rent, credit card debt and other debt is definitely a bit of a scary feeling, like the life preserver will never get to me while I'm in the ocean.' Wickord is trying to chip away at his student loan debt even though he currently owes nothing because he is in an income-driven repayment plan. Still, he has taken on a second job just to get by in San Diego county, where, he said, 'rent is ridiculous.' 'I voluntarily took on student debt, but it adds up way more than you expect,' Wickord said. 'There are times it almost feels predatory with lenders willing to give kids who are 18 or 19 this big loan that takes forever to pay off.' CNN's Alicia Wallace contributed to this report. See Full Web Article
CBS News
05-05-2025
- Business
- CBS News
Student loan collections resume as record number of borrowers fall behind on payments
Millions of student loan borrowers could face a wake-up call Monday as the Department of Education resumes collecting on school loans. The restart of collections comes as data from a recent analysis shows delinquency rates among people with student debt are at an all-time high. After nearly five-years since the U.S. government first paused federal student loan payments and interest accrual as a temporary relief measure during the COVID-19 pandemic, May 5 marks the first day the Education Department's Office of Federal Student Aid (FSA) restarts collections on defaulted federal student loans. Referrals for collection had been put on hold since March 2020 because of the pandemic. That grace period was extended multiple times by the Biden administration and ended in October. "The level of concern here really depends on the reasons a borrower has not paid their federal student loans. If they don't have the capacity, they may be overstretched," Michele Raneri, vice president and head of research at TransUnion, said in a statement."They may not know they have to pay them, may not be able to find the information on how to do so, or may not have a willingness to pay for one reason or another," she said. Still, one in five borrowers Iis "seriously delinquent" or has a past-due payment of 90 days or more, according to a new analysis by TransUnion, one of the three major credit bureaus. The analysis looks at the percentage of student loan borrowers at risk of default and the impact that has on their credit scores. Those in default face an uphill battle: failing to pay means the government can withhold portions of Social Security benefits and tax refunds and garnish wages. Defaulting on a loan can also tank your credit score, which in turn can make it more difficult to obtain a loan in the future. Read on for more information about the state of student loan borrowing as default collections resume. Millions at risk of defaulting The credit bureau's findings underscore how student loan repayments have struggled to get back on track since COVID-19. Payments on student loans were paused in March 2020 and didn't resume until October 2023. For borrowers across the U.S. who didn't have to worry about making payments for years, the resumption of student loan payments presented a challenge for many individuals struggling financially. Out of the 19.6 million student loan borrowers, TransUnion found that roughly 20% are at risk of defaulting. The figure — which TransUnion estimates could be much higher — outpaces the credit bureau's previously recorded all-time high of 15.4% in 2012. For its analysis, TransUnion looked at those susceptible to being 90-days past due on their loans. That winnowed down the field of borrowers from approximately 42 million to a total of 19.6 million borrowers. Excluded from this report were people in deferment or forbearance, or private student loan borrowers, said TransUnion's Raneri. As the federal student aid website outlines, if someone is delinquent on their loans for 90 days or more, a loan servicer can report your delinquency to the national credit bureaus. Credit bureaus have the power to knock off points on a person's credit score if they default on a payment, which can affect their ability to for future loans. who had a minimum payment that was due in the last three months. On average, people who faced default lost an average of 63 points, TransUnion found, although those with higher credit scores were at risk if losing much more. Those in "super prime" credit territory — which defined in the analysis as a credit score of 781 or higher — saw an average credit score decline of 175 points as a result of impending student loan defaults. "Borrowers can review their credit report to see what loan servicers are reporting," Ranieri told CBS MoneyWatch. "This can also help people find who to contact if they have a loan they didn't expect to see." All told, the nation's nearly 43 million student loan borrowers hold a collective $1.6 trillion in debt, according to the Education Department. Agency data indicates that over 5 million of these borrowers have not made a monthly payment in over 360 days, while only 38% are on track with their repayment plans. Secretary of Education: Long overdue Student loan collections were upended during the COVID-19 pandemic. In March 2020, during President Trump's first term in office, the Education Department paused student loan payments and knocked interest rates to zero to give borrowers some breathing room. When former President Biden took office in 2021, he extended the loan repayment deadline multiple times until Congress passed a law directing payments to resume in October 2023. The Biden administration made several attempts to deliver a student loan debt relief during his time in office, but his efforts were stymied by courts. While student loan repayments resumed over a year and a half ago, Monday, May 5, is the first day since March 2020 the Department of Education is collecting repayments from borrowers who have struggled to meet their payment deadlines. For U.S. Secretary of Education Linda McMahon, the return is long overdue. "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said McMahon in an April statement. "The Biden Administration misled borrowers: The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers." contributed to this report.
Yahoo
05-05-2025
- Business
- Yahoo
Collection for defaulted student loans resumes, impacting millions
Millions of student loan borrowers could be hit with a wake up call Monday as the Department of Education resumes collecting on defaulted school loans. The restart of collections comes as data from a new analysis shows delinquency rates are at an all-time high. After nearly five-years since the U.S. government first paused federal student loan payments and interest accrual as a temporary relief measure during the COVID-19 pandemic, May 5 marks the first day the Education Department's Office of Federal Student Aid (FSA) restarts collections on defaulted federal student loans. Referrals for collection had been put on hold since March 2020 because of the pandemic. That grace period was extended multiple times by the Biden administration and ended in October. "The level of concern here really depends on the reasons a borrower has not paid their federal student loans. If they don't have the capacity, they may be overstretched," Michele Raneri, vice president and head of research at TransUnion said in a statement."They may not know they have to pay them, may not be able to find the information on how to do so, or may not have a willingness to pay for one reason or another," she said. Still, one in five borrowers are "seriously delinquent," or have a past-due payment of 90 days or more, according to a new analysis by TransUnion, one of the three major credit bureaus. The analysis looks at the percentage of student loan borrowers at risk of default and the impact that has on their credit scores. Those in default face an uphill battle: failing to pay means the government can withhold portions of Social Security benefits and tax refunds and garnish wages. Defaulting on a loan can also tank your credit score, which in turn can make it more difficult to obtain a loan in the future. Read on for more information about the state of student loan borrowing as default collections resume. Millions at risk of defaulting The credit bureau's findings underscore how student loan repayments have struggled to get back on track since COVID-19. Payments on student loans were paused in March 2020 and didn't resume until October 2023. For borrowers across the U.S. who didn't have to worry about making payments for years, the resumption of student loan payments presented a challenge for many individuals struggling financially. Out of the 19.6 million borrowers, TransUnion found that 20.5% of student loan borrowers are at risk of defaulting. The figure — which TransUnion estimates could be much higher — outpaces the credit bureau's previously recorded all-time high of 15.4% in 2012. For its analysis, TransUnion looked at those susceptible to being 90-days past due on their loans. That winnowed down the field of borrowers from approximately 42 million to a total of 19.6 million borrowers. Excluded from this report were people in deferment or forbearance, or private student loan borrowers, said TransUnion's Raneri. As the Federal Student Aid website outlines, if someone is delinquent on their loans for 90 days or more, a loan servicer can report your delinquency to the national credit bureaus. Credit bureaus have the power to knock off points on a person's credit score if they default on a payment, which can affect their ability to for future loans. who had a minimum payment that was due in the last three months. On average, people who faced default lost an average of 63 points, TransUnion found, although those with higher credit scores were at risk if losing much more. Those in "super prime" credit territory — which defined in the analysis as a credit score of 781 or higher — saw an average credit score decline of 175 points as a result of impending student loan defaults. "Borrowers can review their credit report to see what loan servicers are reporting," Ranieri told CBS MoneyWatch. "This can also help people find who to contact if they have a loan they didn't expect to see." All told, the nation's nearly 43 million student loan borrowers hold a collective $1.6 trillion in debt, according to the Education Department. Agency data indicates that over 5 million of these borrowers have not made a monthly payment in over 360 days, while only 38% are on track with their repayment plans. Secretary of Education: Long overdue Student loan collections were upended during the COVID-19 pandemic. In March 2020, during President Trump's first term in office, the Education Department paused student loan payments and knocked interest rates to zero to give borrowers some breathing room. When former President Biden took office in 2021, he extended the loan repayment deadline multiple times until Congress passed a law directing payments to resume in October 2023. The Biden administration made several attempts to deliver a student loan debt relief during his time in office, but his efforts were stymied by courts. While student loan repayments resumed over a year and a half ago, Monday, May 5, is the first day since March 2020 the Department of Education is collecting repayments from borrowers who have struggled to meet their payment deadlines. For U.S. Secretary of Education Linda McMahon, the return is long overdue. "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said McMahon in an April statement. "The Biden Administration misled borrowers: The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers." Breaking down Trump family's $2B crypto deal She lost her job to care for a baby. Years later, she became family. Exclusive discounts from CBS Mornings Deals
