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Bankers Growing More Worried About Student Loans

Here’s the good news: Bankers seem pretty confident that most Americans will continue to pay off most of their consumer debt on time.

College student piggy bank
Image Source | Getty Images
College student piggy bank

Here’s the bad news: They’re not nearly as optimistic about Americans’ ability to deal with ballooning student loan debt.

A new quarterly survey of U.S. banks’ risk managers finds that more than six in 10 expect student loan debt delinquencies to increase in the next six months. Only about 13 percent expect delinquencies to decrease.

The survey of 215 risk managers, released Tuesday by the credit risk analysis firm FICO, shows that student loan delinquencies have been worrying bankers for most of the year. Nearly 64 percent of the bankers surveyed in the previous quarter had predicted an increase in student loan delinquencies, and about half were expecting such a rise when the survey was conducted in the first three months of the year.

The survey found that bankers were much more optimistic about Americans’ ability to pay off other types of debt.

About two-thirds of the bankers surveyed said they expected delinquency rates on credit card debt to stay the same or go down in the next six months. About three-fourths were expecting delinquency rates for car loans and residential mortgages to stay flat or go down.

Despite worries about rising student loan debt, it appears Americans are continuing to borrow heavily to fund their education. On Friday, the Federal Reservereported that consumer credit for things like car and student loans rose by nearly $14 billion in August from July. In total, U.S. consumer credit rose by more than $18 billion in August. (Read More:Should College Students Have Credit Cards?)

Financial experts have traditionally said that it’s OK to borrow some money to pay for college because the investment should pay off with higher earnings and more stable employment. In recent years, many adults also have flocked back to school in the hopes that more education would give them an edge up in a tight job market that increasingly prizes specialized skills.

But the high cost of college and easy access to student loans have left some Americans deeply burdened by debt.

According to the College Board, for students who received a bachelor's degree in the 2007-08 academic year, the median debt load was about $7,960 for public institutions, $17,040 for private, not-for-profit institutions and $31,190 for-profit institutions. The figures include students who graduated with no debt. (Read More: Debt-Free College? Yes, It Exists)

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