Mounting Student Loans Put Pressure on Economy

Mounting Student Loans Put Pressure on Economy

Student loans are growing and so is the concern bank risk professionals have for the stability of the student loan market. A new survey from FICO conducted by the Professional Risk Managers’ International Association found that more consumer loans are expected to fall into delinquencies, credit card balances are predicted to grow and all of this will put more pressure on the US economy.

According to figures, student loan debt now exceeds credit card debt. Experts estimate that there are $750 billion worth of student loans outstanding currently. Of those surveyed, more than two out of three expect the delinquencies of these loans to increase. “Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs in a news release. “A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they try to cope with their debt during these uncertain times.”

The survey also touched on global issues that could impact economic recovery right here in the US. The largest percentage feel that the European debt crisis will play the biggest part in impacting the US economy, followed by US government policies. “Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”

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