Moody's Offers Pessimistic Outlook for Student Borrowers

August 2, 2011

Delinquency rates on student loans have not improved as the economy has stabilized in recent years, as have the rates for other kinds of consumer loans, raising the prospect that significant numbers of student loan borrowers will be unable to repay their loans in the coming years, Moody's Investors Service says in a new report assessing the stability of the student loan market. The report notes that the student loan market expanded during the last part of the 2000s, in contrast to mortgages and other kinds of borrowing that was significant tightened during the economic downturn. But while delinquency rates on those housing and car loans that were issued after the worst of the downturn have improved, those for student loans have flattened, Moody's says. "Unless students limit their debt burdens, choose fields of study that are in demand, and successfully complete their degrees on time, they will find themselves in worse financial positions and unable to earn the projected income that justified taking out their loans in the first place."

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