While mortgage debt is more manageable in Sonoma County than a decade ago, other types of borrowing are not. Here’s a closer look:
Student loan debt has increased 45.4% in Sonoma County since 2003, the second-highest jump in the nine-county Bay Area, according to a 2019 study by the Federal Reserve Bank of San Francisco and San Francisco Office of Financial Empowerment.
But in 2018, the county also had the lowest level of student loan defaults, at 7.3%, according to the Fed. While the average local household owed nearly $37,000 in student loans, the typical borrower had an outstanding balance of $16,068, according to the Fed, the second-lowest median in the Bay Area.
The troubling exception to the good news was Guerneville, one of the county’s lowest income areas, where the 95446 ZIP code had the third-highest student loan delinquency rate of all ZIP codes in the Bay Area, at 28.6%, and the fourth-highest default rate at 21.4%. The median student loan balance was $29,344, the second-highest of all ZIP codes in the Bay Area.
National vehicle debt almost doubled between 2014 and 2019, and was up more than 90% in the past decade, according to the Federal Reserve. That growth was the largest of all other types of borrowing except student loans. A growing number of auto loans were for seven years instead of five. Early this year, auto debt outstanding was at a record high, the Wall Street Journal reported. During the pandemic, vehicle lending has been flat.
Sonoma County auto loan data was not reported, but the number of vehicles sold annually in the county more than doubled between 2010 and 2017, then declined through 2019, according to IHS Markit. This year, sales were 24% lower than last year through May, according to Experian, but some auto dealers told the North Bay Business Journal in September sales had begun to increase, especially for used cars.
Personal and credit card debt
In good times, these loans and the ability to buy now and pay later can help hardworking households bridge brief shortfalls. For people who can pay off their credit card balance every month, credit cards are simply a convenience. Several area bankers said the uncertainty of the pandemic is prompting many of their customers to pay down their credit card debt.
But counselors who work with lower-income families say this kind of debt can cause persistent and pernicious problems for their clients, especially during hard times. At a time when mortgage interest rates hover at historic lows around 3% or slightly lower, rates on a payday loan can be 370% and on a credit card cash advance, 25%, according to data from California Attorney General’s Office and Bankrate.com. Sometimes interest rates rise automatically. Sometimes late payments triple the interest rate.
Spokespeople for Catholic Charities of the Diocese of Santa Rosa and the nonprofit Community Action Partnership of Sonoma County said some of their low-income clients are accumulating crippling levels of consumer and credit card debt to survive the pandemic.
“The longer a crisis goes on, people with lower incomes are living paycheck to paycheck, using predatory services for things like cashing a check and increasing their debt through credit card use,” said Kathy Kane, assistant director for Community Action Partnership. “It’s been really hard for families and individuals. They just keep getting knocked down.”
Mary Fricker is a retired Press Democrat business reporter. You can reach her at firstname.lastname@example.org.