Despite the rise in student loan balances over the past decade, a new TransUnion study found that student loan obligations have not inhibited younger consumers’ ability to access and repay other consumer credit categories, such as auto loans and mortgages, when compared to their peers without student loans.

According to TransUnion, this is contrary to the popular belief that growing student debt is hampering access to credit for young adults.  Instead, this new study indicates consumers 18-29 years of age with a student loan in repayment generally are able to gain access to new loans and perform as well as or better than similarly aged consumers without student loans.  Furthermore, the study results indicate that in only three to six years, student loan consumers in their 20s have been observed to surpass similarly aged consumers without a student loan in overall loan participation rates on mortgages, auto loans, and credit cards.

According to TransUnion data, the percentage of consumers 20-29 years old with a student loan has grown from 32% in 2005 to 52% at the end of 2014. In the last five years alone, student loan balances have increased from $589 billion in the first quarter of 2010 to $1.1 trillion in the first quarter of 2015.

According to Charlie Wise, co-author of the study and vice president in TransUnion’s Innovative Solutions Group, “Participation rates for mortgages, credit cards and auto loans dropped significantly between the 2005-2007 and 2012-2014 timeframes—and impacted both consumers repaying student loans and those in the control group to a similar degree.  However, just as we observed in 2005, student loan borrowers in 2012 generally left school with lower loan participation rates than their control counterparts, likely due to difficulty in accessing credit while a student with little or no income.”  Wise adds that “[o]ver the next two years, student loan borrowers were actually more credit active in opening new auto and credit cards, enabling them to close this gap.  Further, we saw the rate of new mortgage originations nearly identical between the student loan and control groups, keeping the mortgage gap constant – the same thing we saw in the 2005 cohort.” 

The release of this study coincides with the CFPB’s announcement that it is launching a public inquiry into student loan servicing practices and the re-launch of its Repay Student Debt web tool.  The issues on which the Bureau is seeking information include industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service.