Federal reserve reports high rate of overdue student loans

Although Sallie Mae may think that the current state of student loans is relatively solvent, other sources don't seem to be as optimistic. The Federal Reserve Bank of New York recently released its quarterly report for February and it asserts that, among other things, the fourth quarter "total consumer indebtedness" increased by more then 2 percent. What's more, the total increase for student loans for the year was $114 billion.

With that much money being borrowed, there's more of an imperative for bankers and other lenders across the country to be on their guard when assessing credit applications and trying to decide if it's appropriate to dispense loans to a particular candidate.

In addition to detailing the specifics of the national loan delinquency rate, the report also looked at certain states in comparison. In contrast with the national average and several other states, California seemed to be the state with the highest individual debt balance. This seems to be no surprise as it consistently placed above everyone for several years, although Nevada did take the top spot in the first quarter of 2009.

An article on the Consumerist that specifically focused on the student loan rate noted that, as another site Credit.com analyzed, the report leaves off important factors, like credit card debt or those students who haven't started actively paying their loans yet.

"in reality, the total amount of loans delinquent by 90 or more days is about 23 percent, more than double what the report shows," the article says.

That may seem like a daunting situation for lenders, but with application processing software that allows organizations to consistently apply sound business rules when evaluating credit risk, there is a great opportunity to make progress in reducing overall delinquencies by ensuring that borrowers are only given loans that they can handle.

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