01
Feb
13

Student Debt Continues to Pile Up

The number of student loans held by subprime borrowers is rising, and more of those loans are going bad, the latest signs that a weak job market and rising debt loads are hurting recent college grads.

In all, 33% of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24% in 2007, according to a Wednesday report by TransUnion LLC.

TransUnion discovered that 33% of the almost $900 billion in outstanding student loans was held by subprime borrowers as of March 2012, up from 31% in 2007.  Subprime borrowers are the least credit worthy.

Another study, released by Fitch Ratings warned that the difference between college costs and amounts students can borrow under the federal student-loan program will continue to enlarge.

In the five years through last March, the segment of all student loans that were 90 days or more delinquent rose to 11.4% from 8.8%, while the average student-loan balance per borrower increased 30% to $23,829.

Another study, released by credit-score provider Fair Isaac Corp., found that roughly 26 million consumers had two or more open student loans on their credit report in October 2012, up from about 12 million in 2005. A majority of bank risk managers expect student-loan delinquencies to continue to rise.

Repaying debt has become more difficult in part because loan balances have grown and the interest rates on federal loans have increased as a result of a shift from variable-rate to fixed-rate loans. Most federal loans now carry interest rates of 6.8% or 7.9%, versus a rate of 2.875% on federal Stafford loans in May 2005.

If you are in default on your student loans, contact the Zarcone Law Firm for a FREE consultation.

619-800-3082 or alex@financialfreshstart.org.

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