Despite a brewing crisis in the government-backed student loan market, private student loans remain a good bet for lenders, according to a study released Thursday by San Francisco-based MeasureOne. The report found that the amount of private student loan debt outstanding has been relatively flat since 2008, with a falling delinquency rate. Over the same period, federal student loan debt has mushroomed from $577 billion in 2008 to more than $1 trillion today.
A top official at the Consumer Financial Protection Bureau recently warned of the possibility of a housing crisis-style bust in the student loan market. The delinquency rate for private student loans fell to just over 3 percent at the end of the third quarter, from 6 percent in early 2009. The Federal Reserve Board estimated the delinquency rate for all student loans to be 21 percent late last year.
Private loans represent a small portion of total student debt; the seven largest lenders hold about $63 billion in total debt, MeasureOne reports. One reason for the improved performance of private student loans is that lenders are more cautious. Among private student loans for the 2012/2013 academic year, 86.65 percent had a cosigner, compared to 75.33 percent for the 2008/2009 year. And the percentage of loans certified by the borrower's school rose to 95.75 percent for the past academic year, from 88.30 percent in 2008.