Cars and Diplomas

Nonrevolving consumer credit — installment loans with fixed payment schedules — is the older, larger, and less glamorous sibling of revolving credit. As we saw in Episode 1, it accounts for 74% of total consumer credit, or $3.79 trillion. In Episode 2, we traced how revolving credit’s share peaked at 41% in 1998 and then declined. This episode tells the other side of that story: the explosive growth of nonrevolving credit that swallowed the rest.

The history is a tale of three eras. From 1943 to roughly 1990, nonrevolving credit was essentially synonymous with auto loans. Americans financed cars, appliances, and furniture, and paid them off in 24 or 36 monthly installments. The category grew from $5.5 billion to $570 billion — a hundred-fold increase, but one that tracked population growth, car prices, and the general expansion of the middle class. Nothing extraordinary.

The second era, from 1990 to 2010, saw the emergence of student loans as a major force. The federal government had been guaranteeing student loans since the Higher Education Act of 1965, but the amounts were modest through the 1980s. Then tuition began its relentless climb. Between 1990 and 2010, the average cost of a four-year public university roughly tripled in inflation-adjusted terms, from about $3,500 to $9,000 per year. Federal student lending expanded to fill the gap. By 2010, student loans had reached $856 billion — surpassing auto loans ($714 billion) for the first time. It was a crossing that no one saw coming.

The third era, from 2010 to the present, has been an arms race between cars and diplomas. Auto loans surged as average transaction prices climbed from $30,000 to $49,000 and loan terms stretched to 72 and even 84 months. Student loans plateaued after 2020 as enrollment stalled and forgiveness programs created uncertainty. Today auto loans sit at $1.57 trillion and student loans at $1.78 trillion — together making up 88% of the nonrevolving total.

General Motors Acceptance Corporation, founded in 1919, invented the modern auto loan. GMAC’s pitch was simple: instead of saving $800 to buy a Chevrolet outright, put $200 down and pay the rest in 12 monthly installments. It worked so well that by 1927, two-thirds of all new cars were financed. A century later, 85% of new-car purchases involve a loan or lease, and the average amount financed has reached $40,927 according to Experian.

The MVLOAS series tracks motor vehicle loans outstanding. In 1943, the total was $300 million. By 2000, it had reached $581 billion. Then something curious happened: auto loans stagnated through the 2000s, dipping below $700 billion during the recession, as the subprime auto boom that preceded 2008 unwound. The recovery didn’t begin until 2011.

Since then, the growth has been extraordinary. Auto loans more than doubled from $714 billion in 2010 to $1.57 trillion by late 2024. Three forces drove this surge. First, vehicle prices: the average new car transaction price went from $29,000 in 2010 to nearly $49,000 in 2023, pushed by the SUV and truck shift, chip shortages, and dealer markups. Second, longer terms: the average new-car loan term stretched from 63 months in 2010 to 70 months in 2024, with some lenders offering 84-month loans. A seven-year loan on a depreciating asset is financially precarious — but it keeps the monthly payment manageable. Third, used cars: the pandemic-era spike in used-car prices (up 45% between 2020 and 2022) inflated the loan amounts for secondhand vehicles, which now make up more than half of all auto loan originations.

The student loan is the most politically charged category of consumer debt — and statistically the most unusual. It is the only form of consumer credit that is mostly owed to the federal government. Of the $1.78 trillion in student loans tracked by SLOAS, roughly $1.52 trillion (85%) is held by the federal government directly. The rest is held by private lenders and securitized by banks.

The SLOAS series begins in 2006, when student loans totaled $481 billion. Over the next eight years, the balance nearly tripled to $1.24 trillion by 2014 — a pace of growth that dwarfed every other category of consumer credit. The drivers were well-known: tuition inflation, the surge in enrollment that followed the 2008 recession (when unemployed workers went back to school), the expansion of federal lending limits under the SAFRA Act of 2010, and the rise of for-profit colleges that aggressively marketed to low-income students.

Since 2019, the growth has essentially stopped. Student loans have hovered between $1.64 trillion and $1.78 trillion, barely budging. Several forces are at play. College enrollment peaked in 2010 and has declined by roughly 15% since. The Biden administration’s various forgiveness programs — from the broad attempt at $10,000–$20,000 per borrower (struck down by the Supreme Court in 2023) to the more targeted SAVE plan — have cancelled roughly $175 billion for 4.8 million borrowers, putting downward pressure on the outstanding total. And the 40-month payment pause from March 2020 to October 2023 created a period where no new interest accrued on federal loans, keeping the balance flat.

The plateau is real but potentially temporary. If the payment pause resumes or new forgiveness rounds are enacted, the total could fall. If tuition continues to climb and enrollment recovers, it could rise. For now, the student loan is the strange creature of American consumer credit: enormous, politically contested, and essentially frozen in place.

The table above captures one of the most dramatic compositional shifts in American consumer finance. In just eighteen years, the nonrevolving credit market doubled from $1.5 trillion to $3.7 trillion, and the balance of power completely reversed. In 2006, auto loans were half the category and student loans were a third. By 2012, student loans had overtaken autos. By 2016, student loans were 53% of the total — a position they held through 2020.

The recent stabilization of student loans, combined with the post-pandemic surge in auto prices, has brought the two closer together. As of 2024, student loans edge out auto loans by just six percentage points (49% to 43%). The “Other” category — personal loans, retail installment credit, and miscellaneous — has remained small, between 8% and 15%, throughout the period.

Nonrevolving credit has grown every single year since 2010 — a sixteen-year streak that makes revolving credit’s crashes and recoveries look volatile by comparison. But the character of that growth has changed. In the early 2010s, it was student-loan-driven: 8–10% annual growth fueled by tuition inflation and rising enrollment. Since 2019, growth has slowed to 0–5% per year, as student loans plateaued and auto loan growth moderated after the post-pandemic surge.

The year 2024 stands out: nonrevolving credit actually declined 1.0%, the first negative year since 2009. Auto loans leveled off as buyers exhausted pent-up demand and high interest rates (7–8% on new cars) cooled the market. Student loans ticked down slightly as forgiveness cancellations offset new originations. The question for 2025 and beyond is whether the $3.7 trillion total has reached a natural plateau — or whether the next cycle of auto innovation (EVs, autonomous vehicles) and the next generation of students will push it higher.