Student Loan Debt Doesn’t Ruin Chance At Other Credit, Study Finds

Loans, Student Loans
student loan debt credit

Crippling student loan debt is an issue that has raised concerns all the way up to the White House.

But a new study suggests that at least one of the problems associated with it — the inability to get other credit because of outstanding student debt — may not be as bad as some fear.

Young adults with outstanding student loans are able to access, and pay for, other credit products, like auto loans and mortgages, at roughly the same rate as their peers, according to a multiyear study by TransUnion, the third-largest credit bureau in the United States.

“Going to school impacts young consumers’ access to credit; while in school, students may be less likely to have a job and generate the income necessary for loan approval,” said Steve Chaouki, executive vice president and the head of TransUnion’s financial services business unit. “However, most catch up once they leave school — and their ability to catch up has not changed over the past decade.”

The TransUnion study does show that the number of young adults with student debt, and the amount they owe, are both skyrocketing.

The percentage of consumers ages 20 to 29 with a student loan has shot up from 32% in 2005 to 52% at the end of 2014, according to TransUnion data. Since 2010, the amount Americans owe in student loans has risen from $589 billion to $1.1 trillion, the company says.

TransUnion looked at three study groups of student-debt holders, one starting in 2005, one in 2009 and the other in 2012, then compared them to similarly aged consumers who didn’t have student debt.

The percentage of all consumers ages 18 to 29 with products such as mortgages, credit cards and auto loans dropped significantly between 2005 and 2012. But the dip was roughly the same for student-loan holders and those who didn’t have one.

For example, in 2012, about 34% of consumers who had a student loan also had an auto loan when they began repaying their student debt. That trailed the 41% of non-student debt holders who had a car loan. But, two years later, the gap had shrunk to 49%-52%.

Among that same group, more than 72% of student-debt holders had a credit card two years after they started repayment, the same percentage as non-student debt holders.

Eventually — generally within three to five years — each of the three student-loan groups caught up with their peers in all categories, TransUnion said.

“This is an especially important finding, because it shows the dramatic rise in student loan balances has not materially impacted younger consumers in gaining access to mortgages, auto loans or credit cards, or in their ability to successfully manage their new credit obligations,” said TransUnion vice president Charlie Wise.

TransUnion drew on a large sample of its customer base for the study’s data. A spokeswoman said that the 2005 group included about 570,000 consumers, the 2009 study had 1.25 million and 2012’s included 1.56 million young adults.

Doug Gross is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @doug_gross and on Google+.


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