Everybody on the planet knows that the US is having an issue with Student debt piling up. The problem is not that the student debt market is growing, the problem is that default rates are growing and now exceeding all other debt markets as seen below in the graph. 11.5 percent of students were 90+ days delinquent or in default, which is significantly higher compared to credit card delinquency of 7.5%, auto loans 4%, and mortgages 1.5%.
For some reason, student debt gets grouped into mortgage debt and marked as good debt while credit card debt is bad. How can bad debt have a lower delinquency rate than good debt? How come 1.5% vs 11.5% delinquency rates get grouped together? There are so many flaws in this methodology and thought process.
One of the biggest reasons student loans are reaching high delinquency rates is the interest rate on these loans can be very high. On top of that many graduates don’t know the vast opportunities to secure lower interest rate loans or refinancing options to decrease monthly payments.
As student become educated they are slowly moving toward private refinancing options rather than traditional banks who may be using antiquated processes and structures.