Student Loan Default Rate 2018
Now that the economy is beginning to recover and more consumers are able to tackle their debt and stay on top of the loans that went unpaid for the past few years, delinquency rates on mortgages and credit card balances are falling. But one type of debt that has been on the rise is student loans – not a huge surprise considering the growing price of college and stagnant unemployment rate. But something banks may want to be aware of is the high rate of risky borrowers with student loans and the default rate that is accompanying this trend.
The Wall Street Journal reported this week that exactly a third of the $900 billion in outstanding student loan debt is held by subprime borrowers, up from 31 percent in 2007. Of those subprime borrowers, a third are more than 90 days past a payment, also up from the 24 percent recorded in 2007. Not only does this pose a challenge for lenders, with smaller returns on their loans, but it also suggests a larger problem. And, as Cristian de Ritis, a senior director with Moody’s, told the news source it may be up to the government and taxpayers to pay up the rising debt.
It’s difficult to know if borrowers were considered subprime before they applied for loans or as a result of the loans, but either way, it may be more difficult to apply for mortgages or auto loans in the future with poor credit history. As one borrower explained to the Journal, “Maybe they shouldn’t be so willing to give money to kids,” she said, “We all thought we’d be making $100,000 out the door.”
For banks, using risk management tools to make decisions regarding borrowers can help keep the default rate from getting higher, not only for student loans, but for other loans as well. With a lower default rate, not only will borrowers be able to stay on top of future finances and banks can remain profitable, but taxpayers won’t be needed to cover the outstanding balances.
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Now that the economy is beginning to recover and more consumers are able to tackle their debt and stay on top of the loans that went unpaid for the past few years, delinquency rates on mortgages and credit card balances are falling. But one type of debt that has been on the rise is student loans – not a huge surprise considering the growing price of college and stagnant unemployment rate. But something banks may want to be aware of is the high rate of risky borrowers with student loans and the default rate that is accompanying this trend.
The Wall Street Journal reported this week that exactly a third of the $900 billion in outstanding student loan debt is held by subprime borrowers, up from 31 percent in 2007. Of those subprime borrowers, a third are more than 90 days past a payment, also up from the 24 percent recorded in 2007. Not only does this pose a challenge for lenders, with smaller returns on their loans, but it also suggests a larger problem. And, as Cristian de Ritis, a senior director with Moody’s, told the news source it may be up to the government and taxpayers to pay up the rising debt.
It’s difficult to know if borrowers were considered subprime before they applied for loans or as a result of the loans, but either way, it may be more difficult to apply for mortgages or auto loans in the future with poor credit history. As one borrower explained to the Journal, “Maybe they shouldn’t be so willing to give money to kids,” she said, “We all thought we’d be making $100,000 out the door.”
For banks, using risk management tools to make decisions regarding borrowers can help keep the default rate from getting higher, not only for student loans, but for other loans as well. With a lower default rate, not only will borrowers be able to stay on top of future finances and banks can remain profitable, but taxpayers won’t be needed to cover the outstanding balances.
[:es]Now that the economy is beginning to recover and more consumers are able to tackle their debt and stay on top of the loans that went unpaid for the past few years, delinquency rates on mortgages and credit card balances are falling. But one type of debt that has been on the rise is student loans – not a huge surprise considering the growing price of college and stagnant unemployment rate. But something banks may want to be aware of is the high rate of risky borrowers with student loans and the default rate that is accompanying this trend.
The Wall Street Journal reported this week that exactly a third of the $900 billion in outstanding student loan debt is held by subprime borrowers, up from 31 percent in 2007. Of those subprime borrowers, a third are more than 90 days past a payment, also up from the 24 percent recorded in 2007. Not only does this pose a challenge for lenders, with smaller returns on their loans, but it also suggests a larger problem. And, as Cristian de Ritis, a senior director with Moody’s, told the news source it may be up to the government and taxpayers to pay up the rising debt.
It’s difficult to know if borrowers were considered subprime before they applied for loans or as a result of the loans, but either way, it may be more difficult to apply for mortgages or auto loans in the future with poor credit history. As one borrower explained to the Journal, “Maybe they shouldn’t be so willing to give money to kids,” she said, “We all thought we’d be making $100,000 out the door.”
For banks, using risk management tools to make decisions regarding borrowers can help keep the default rate from getting higher, not only for student loans, but for other loans as well. With a lower default rate, not only will borrowers be able to stay on top of future finances and banks can remain profitable, but taxpayers won’t be needed to cover the outstanding balances.
[:it]Now that the economy is beginning to recover and more consumers are able to tackle their debt and stay on top of the loans that went unpaid for the past few years, delinquency rates on mortgages and credit card balances are falling. But one type of debt that has been on the rise is student loans – not a huge surprise considering the growing price of college and stagnant unemployment rate. But something banks may want to be aware of is the high rate of risky borrowers with student loans and the default rate that is accompanying this trend.
The Wall Street Journal reported this week that exactly a third of the $900 billion in outstanding student loan debt is held by subprime borrowers, up from 31 percent in 2007. Of those subprime borrowers, a third are more than 90 days past a payment, also up from the 24 percent recorded in 2007. Not only does this pose a challenge for lenders, with smaller returns on their loans, but it also suggests a larger problem. And, as Cristian de Ritis, a senior director with Moody’s, told the news source it may be up to the government and taxpayers to pay up the rising debt.
It’s difficult to know if borrowers were considered subprime before they applied for loans or as a result of the loans, but either way, it may be more difficult to apply for mortgages or auto loans in the future with poor credit history. As one borrower explained to the Journal, “Maybe they shouldn’t be so willing to give money to kids,” she said, “We all thought we’d be making $100,000 out the door.”
For banks, using risk management tools to make decisions regarding borrowers can help keep the default rate from getting higher, not only for student loans, but for other loans as well. With a lower default rate, not only will borrowers be able to stay on top of future finances and banks can remain profitable, but taxpayers won’t be needed to cover the outstanding balances.
[:tr]Now that the economy is beginning to recover and more consumers are able to tackle their debt and stay on top of the loans that went unpaid for the past few years, delinquency rates on mortgages and credit card balances are falling. But one type of debt that has been on the rise is student loans – not a huge surprise considering the growing price of college and stagnant unemployment rate. But something banks may want to be aware of is the high rate of risky borrowers with student loans and the default rate that is accompanying this trend.
The Wall Street Journal reported this week that exactly a third of the $900 billion in outstanding student loan debt is held by subprime borrowers, up from 31 percent in 2007. Of those subprime borrowers, a third are more than 90 days past a payment, also up from the 24 percent recorded in 2007. Not only does this pose a challenge for lenders, with smaller returns on their loans, but it also suggests a larger problem. And, as Cristian de Ritis, a senior director with Moody’s, told the news source it may be up to the government and taxpayers to pay up the rising debt.
It’s difficult to know if borrowers were considered subprime before they applied for loans or as a result of the loans, but either way, it may be more difficult to apply for mortgages or auto loans in the future with poor credit history. As one borrower explained to the Journal, “Maybe they shouldn’t be so willing to give money to kids,” she said, “We all thought we’d be making $100,000 out the door.”
For banks, using risk management tools to make decisions regarding borrowers can help keep the default rate from getting higher, not only for student loans, but for other loans as well. With a lower default rate, not only will borrowers be able to stay on top of future finances and banks can remain profitable, but taxpayers won’t be needed to cover the outstanding balances.
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