Delinquent Student Loans Climbing Fast
A new FICO study reveals that student loan debt has increased dramatically and the default rates on these loans are now much higher than previous years.
These loans pose a greater risk now due to the higher debt loans and a challenging labor market.
The study found that nearly 12 million consumers had two or more open loans on their credit report in 2005. That figure has more than doubled to 26 million in 2012.
In 2005, consumers with open student loans on file had an average student loan debt of $17,233. In 2012, that debt had increased 58 percent to $27,253.
Additional findings in the study:
- The percentage of consumers with student loan debt in excess of $100,000 quadrupled between 2005 and 2012 from 0.2 percent to 0.8 percent. Approximately 1.2 million more consumers had student loan debt in excess of $100,000.
- Delinquency rates also increased for student loans. Between October 2010 and October 2012, 25 percent of student loans were at least 90 days past due. That is a 47 percent increase from the 2005-2007 period.
“This situation is simply unsustainable and we’re already suffering the consequences,” said FICO’s chief analytics officer, Dr. Andrew Jennings, in a statement. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default. There is no way around that harsh reality.”