You may have thought your classroom days—and student loan debt—were behind you, but economic conditions have sent many of the unemployed and underemployed back to school. If you are planning to use student loans to finance new academic pursuits, it’s important to figure out now how you will pay off the debt after graduation.
Increased demand, increased write-offs
With the growing demand for student loans—currently at its highest level since 2006—and only a modest employment recovery, student loan write-offs have been increasing. Banks wrote off $17.4 billion in student loan debt in 2012, a record for the seven years tracked, according to a recent Equifax Credit Trends report. In addition, $5 billion in student loan debt was written off for the first three months of 2013, an increase of more than 45 percent from the prior year.
Outstanding loans and balances on the rise
The weak labor market and limited employment options for college graduates may also be contributing to a steady rise in student loan delinquencies and defaults. Outstanding balances on student loans, for example, increased by more than 16 percent from March 2012 to March 2013—from $748.6 billion to $896.9 billion. The number of outstanding student loans increased by almost 17 percent—from 107 million to 126 million.
Rising credit limits, new loan originations
While 2012 saw an increase in origination credit limits across six different loan types, the most substantial increase was for student loans—the student loan credit limit was at $88.5 billion in 2012, about a 24 percent increase from the $71.5 billion in 2011. Additionally, there were 18.6 million student loan originations in 2012, which was a 14 percent increase from the 16.3 million in 2011.
Because the college price tag is increasing faster than the rate of inflation, student loan debt is expected to grow. Therefore, it’s important that you consider how you are going to pay back debt once you receive your diploma.
All statistics from the Equifax U.S. Consumer Information Solutions: U.S. Consumer Origination Trends and U.S. Consumer Information Solutions: U.S. Consumer Credit Trends reports, released March 15, 2013.
Janet Dedrick is a strategic consultant with the Equifax Analytical Center of Excellence. Janet covers US consumer credit trends reporting and analysis in addition to supporting Equifax client analytical initiatives. Prior to Equifax, Janet worked in the financial services industry in various roles, including risk management and banking regulatory policy areas. Janet holds an MBA from the University of Chicago.
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