Student Loans Riskier Than Ever

It’s more important then ever to think about how your student loan debt will affect the rest of your life and figure out a plan to pay it down.

Research by FICO Labs says as a  group those who take out student loans today are more likely to default than students who borrowed a few years ago. 

FICO is the company that created the measurement for widely used credit scores.  So they are looking at how this will ruin a lot of people’s ability to borrow, rent, pay bills and even get a job.

Researchers found the amount of debt is likely to be higher than ever. The  average U.S. student loan debt was $17,233 in 2005 and .jumped to more than $27,253 by 2012, according to Fico.  That’s an increase of 58 percent in seven years.  In contrast, credit card debt and car loan debt decreased.

In addition, 60% of bankers surveyed said they expect defaults to go up over the next six months.

Dr. Andrew Jennings, FICO’s chief analytics officer and head of FICO Labs says the debt levels are unsustainable.  He said, “As more people default on their student loans, their credit ratings will drop, making it harder for them to access new credit and help grow the economy.

Even people who stay current on their student loans are dealing with very large debts, which reduces the money they have available to spend elsewhere.

The stakeholders in the student lending industry have to take a hard look at the terms and repayment rules for student loans, and the industry may have to develop a new lending model to prevent a bad situation from getting completely out of hand.”

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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.