Dark Clouds Looming Over Student Loan Industry

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My earlier blog post quantified some of the trends we have been seeing in the US student loan industry, namely the precipitous increase in student loan debt.   Our ongoing analysis has found another disturbing trend: recent vintages of student loans have noticeably lower FICO® Scores than earlier vintages.   This chart illustrates the score distribution trend for consumers who have recently opened a new student loan.     Here we see a clear shift toward lower scores. In fact, the median score has dropped 17 points from 659 to 641.     These findings indicate that in recent years, student loan lenders have made student loans available to more consumers with lower credit quality. Since private student loan lenders were … [Read more...]

Student Loan Debt and FICO Score Trends

  As students incur more student loan debt, lenders and investors in student loans are asking how this is affecting US consumers’ FICO Scores. New FICO research provides interesting insights.   With education costs rapidly outpacing inflation, more consumers are taking out student loans to pay for their education. Looking at a large data sample from a credit reporting agency, we found that 6.2% of US consumers had two or more open student loans on their credit report in 2005. By 2012, that number grew to roughly 11.8%.   Consumers also have a greater amount of student loan debt today. In 2005, consumers with an open student loan on file had an average student loan debt of $17,236. In 2012, that number increased 54% to $26,549. This has outpaced growth for … [Read more...]

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