Third of Student-Loan Debt Belongs to Subprime Borrowers

Wall Street Journal
January 31, 2013
Ensign, Rachel Louise; Simon, Ruth

About a third of all student loan debt belongs to subprime borrowers; and a growing number of these risky loans are not being repaid on time, according to a report from TransUnion. Nearly $300 billion of the almost $900 billion in outstanding student loans was held by the riskiest category of borrowers last March. Of the subprime student loans that have come due, 33 percent were considered delinquent -- a rise from 24 percent five years prior, according to TransUnion, which released the report on Jan. 30. A separate study released the same day by Fitch Ratings warned that the gap between education costs and how much students can borrow in federal loans will only widen. Additionally, Fair Isaac on Jan. 29 published a report finding that an estimated 26 million U.S. consumers had at least two open student loans on their credit reports as of October. Most bank risk managers agree that student loan delinquencies will continue to escalate, according to that paper.
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