Student Lending's Failing Grade

Cristian Deritis:

The student lending industry managed to avoid many of the pitfalls that affected mortgages, auto loans and credit cards during the Great Recession. In fact, volume growth has been steady, if not accelerating, as more individuals sought additional education and training in response to the weak labor market, and as lenders did not tightened standards to anywhere near the degree of other segments. The performance of student loans in recent years has barely changed; delinquency and loss rates on outstanding student loan balances remained steady throughout the recession. While this may sound positive, it is concerning in light of the strong balance and account growth, which would typically push delinquency rates down. In addition, performance of other consumer loan segments has significantly improved as the economy has recovered; performance of student loans has not. In this study, we examine the rapid growth of the student loan industry over the past few years, the weakening per- formance of loan portfolios, and what these trends suggest for future performance and lending volumes.

Posted by Jim Zellmer at August 3, 2011 4:32 AM
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