Using AI to Assess and Understand Your Loan Portfolio Ahead of Student Loan Repayments


The debt-limit deal struck by the White House and congressional Republicans says the pause on student loan payments will expire no later than Aug. 30. This decision may have had significant consequences for credit unions and dealers five or ten years ago. But with the rise in AI-driven tools, there are more ways to identify a person’s ability to pay or purchase even when their debt obligations change from one week to the next.

It’s a significant issue and something that credit unions should be getting in front of now, doing what they can to understand their exposure. This is not just in terms of which members have student loans and the size of their balances, although those are key points to factor, but also taking a step back and looking at those members holistically. For example, of those members with student loans, who is in better shape to handle these additional and/or new payments, and who may be struggling now that those payments will come due?

Additionally, there are a number of student loan holders who started school and originated auto loans during the pandemic and have never made a payment. This highlights the importance of understanding not only which students have loans but also where they are in the payment cycle of that loan.

Why this news is important

According to an analysis of Federal Reserve data, Gen-Z and millennial borrowers are significantly behind on their car payments at rates last seen during the financial crisis of 2008 and 2009.

From 2000 to 2023, on average, 3.58 percent of 18- to 29-year-olds and 2.62 percent of the 30- to 39-year-old age groups have been late on their auto loans by 90 days or more, compared with 2.13 percent of all borrowers. However, the spread between those younger groups’ delinquency rates and the national average has been elevated recently.

The 4.55 percent 90-day delinquency rate among 18- to 29-year-olds in the first quarter of 2023 was the highest since the fourth quarter of 2009, and the 3.06 percent rate among 30- to 39-year-olds was the worst since the third quarter of 2010. The Fed’s figures are four-quarter rolling averages.

Younger borrowers went on a car-buying shopping spree during and immediately after the pandemic, when stimulus funds were aplenty. However, the rising cost of car ownership has left younger borrowers struggling to cover car payments as well as manage other debt. Many lenders also offered generous COVID extension opportunities under natural disaster extensions, potentially exasperating the situation further.

What’s more important to note is that the return of student loan payments won’t solely affect younger borrowers who bought a car during the pandemic, but it will also significantly impact those wishing to buy one later this year and next year when the additional payments muddy the waters even more for dealers and lenders trying to get a sense of a person’s propensity to pay.

Enter the power of AI

With today’s use of AI (artificial intelligence), credit unions and dealers are gaining a better understanding of who’s in their existing portfolio, and who wants in through new loans and purchases. AI’s ability to process vast amounts of data and extract meaningful insights is invaluable for credit unions, fintechs, and dealer partners. And, by leveraging machine learning algorithms, financial institutions can analyze customer behavior, detect patterns, and make data-driven decisions.

AI-powered risk assessment models are improving fraud detection capabilities, reducing financial risks, and enhancing regulatory compliance. Also, AI-driven predictive analytics is enabling accurate credit scoring and facilitating faster loan approvals, benefiting both businesses and consumers. Each of these tools will play a large role in determining the impact new student loan payments have on existing customers in a portfolio, as well as helping in the decisioning process of matching a new buyer with the right vehicle and the right loan threshold.

This higher level of confidence in lending and selling can also be achieved without compromising today’s need for a frictionless shopping experience. New AI tools enable auto lenders and dealers to digitally obtain consumer documents to verify financing requirements. Through accurate income calculations and validation of applicant data, loans are processed faster and more accurately with reduced fraud and improved dealer and consumer experiences.

These tools enable dealers to instantly verify consumer data and calculate income, providing a transparent and accurate financing experience. It enables car buyers to easily and securely provide documents and data electronically, giving dealers visibility into what the customer can afford, in real time taking into account changing payment obligations due to student loan payments.

AI is a friend, not foe

The fusion of AI and fintech is reshaping the financial services landscape, driving innovation, and constantly improving customer experiences inside dealer showrooms. From streamlining operations and advanced data analytics to personalized customer interactions and enhanced security, AI is revolutionizing every aspect of the fintech and auto lending industry.

As AI continues to evolve, its potential for disruption in financial services will only grow, unlocking new opportunities and shaping the future of finance. With these tools, auto lenders and dealers will have the confidence to sell more cars knowing payments will be made, even with additional obligations from student loans.


  • Adine Deford

    Adine Deford is vice president of marketing at Informed.IQ, an AI startup serving the financial services industry that uses machine learning models to classify, analyze, and extract data from documents used in consumer lending, mortgage, and bank account openings.

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