On Wednesday TransUnion LLC released an alarming report confirming one of our greatest fears: one-third of all student loans are going to subprime borrowers, and many of these loans are beginning to go bad.
The WSJ reports:
The Chicago-based credit bureau found that 33% of the almost $900 billion in outstanding student loans was held by subprime, or the riskiest, borrowers as of March 2012, up from 31% in 2007. . . . A majority of bank risk managers expect student-loan delinquencies to continue to rise, according to Fair Isaac.
“If you become subprime, it’s more likely that you will not pay your debt,” said TransUnion Vice President Ezra Becker, who oversaw the study.
Given that the federal government is now responsible for nearly 93 percent of student loans, many are beginning to worry that taxpayers will once again find themselves on the hook for bad loans. And with a fraying job market and ballooning university costs, these loans won’t get any easier to pay off.
Who says there’s no higher ed bubble?