Daily Herald - Suburban Chicago's source for news This copy is for personal, non-commercial use. To order presentation-ready copies for distribution you can: 1) Use the "Reprint" button found on the top and bottom of every article, 2) Visit reprints.theygsgroup.com/dailyherald.asp for samples and additional information or 3) Order a reprint of this article now.
Article updated: 1/29/2013 11:49 AM

Overdue student loans reach 'unsustainable' 15%

By

Delinquency rates on student loans made in the past two years stand at 15 percent in the U.S. as recent graduates struggle to find jobs, Fair Isaac Corp. said.

The rate for 2010 through 2012 compares with 12.4 percent for loans made from 2005 to 2007, Fair Isaac's FICO Labs said in a statement today, citing data from October. Average student- loan debt last year rose to $27,253 from $17,233 in 2005, and almost 60 percent of bank managers surveyed in December expect delinquencies to worsen in six months, FICO said.

"This situation is simply unsustainable and we're already suffering the consequences," Andrew Jennings, chief analytics officer of Fair Issac, said in the 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."

Student loans are the largest source of unsecured consumer debt in the U.S., according to the Consumer Financial Protection Bureau, and the rise in unpaid loans has spurred speculation about a possible bubble. With college costs climbing faster than the rate of inflation over the past four decades, outstanding education debt has swelled to $1 trillion, more than what Americans owe on their credit cards.

Subprime mortgage delinquencies, which helped trigger a global credit crunch during the last decade, reached 15 percent in the middle of 2007 as the financial crisis began to develop.

Fair Isaac is the Minneapolis-based developer of the FICO score, a measurement of consumer credit risk that banks use to decide whether to extend loans and what interest rate to charge.

Copyright © 2014 Paddock Publications, Inc. All rights reserved.