CU Student Loans May Dodge Asset Bubble, Delinquency Rates
From the Wall Street Journal to the activist blog Zero Hedge, economists and pundits have been actively debating this year whether or not a student loan asset bubble exists and if so, when it might pop.
The chatter intensified April 25 when Sallie Mae, the country’s largest originator of federally insured student loans, scrapped a $225 million debt offering. The Wall Street Journal reported the lender pulled the plug on the deal because investors felt the 3.5% interest rate offered wasn’t enough to offset risk. Included with the article was a graph that showed as of year-end 2012, more than 31% of all borrowers were 90 days or more past due on their student loans.
The fact that the private student loan delinquency rate is significantly lower than that of federal student loans also decreases credit risk for credit unions, said Jim Holt, vice president of sales operations for CU Student Choice, a private student loan CUSO in Washington.
Holt said the most recent 60-day delinquency rate for all private student loans is 5.4%, and according to NCUA financial reports, private student loans at credit unions had just a 1.46% 60-day delinquency rate. Furthermore, he added, CU Student Choice loans have an even lower 60-day delinquency rate of 0.89%.