Default Rates Rise Across the Board

Default rates for student loans rose to 5.4 percent in the 2nd Qtr, gathered from Moody’s Investors Service.

The data showed yearly default rates up from 5 percent in the first quarter and 4.5 percent a year ago. Major factor is high unemployment rates among grads. Much of the increase in private student loan defaults was attributed to loans that were securitized — whereby loans and other forms of consumer debt are packaged and sold to investors as bonds or other securities — in 2010, a period which also contained more delinquencies as borrowers struggled to repay their loans.

The unemployment rate for young college graduates was 9 percent in the first half of 2011, and since private student loans securitized between 2008 and 2010 hold a greater proportion of young college graduates than loans securitized in previous years, those loans have a higher default rate, according to Moody’s (“Moody’s: Private Student-Loan Defaults Tick Up To 5.4% In 2Q,” The Wall Street Journal, Aug. 17, 2011).

The data showed delinquency rates for student loans have risen; however, other consumer debts have fallen.

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About defaultprevention

Default Prevention Specialist since 1998.
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