Tags: FICO | Student | Loan | Crisis

FICO Survey: Student Loan Crisis May Be Brewing

Friday, 13 Jan 2012 08:32 AM

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More and more risk managers are concerned that a troubling wave of student loan delinquencies may be building on the horizon.

A FICO quarterly survey of risk managers shows that more than two-thirds are seriously concerned over the levels of debts carried by students, and 67 percent believe delinquencies on student loans will rise, well above a 19 percent tally from a previous survey.

"They are worried about the amount of student loans that are out there and the ability of those students to repay them," says Mark Greene, CEO of FICO, which provides credit scores, according to The Daily Ticker, a Yahoo Finance news service.

"Clearly education has a great return on investment so there is no suggestion you should avoid taking out loans, but be careful what you are getting into," Greene adds.

"Manage your student loans as carefully as you would your mortgage, your credit card or something else."

In 2011, student loans surpassed credit card debts, topping $1 trillion, according to Federal Reserve data.

At least interest rates tied to those loans won't shoot up any time soon.

The Federal Reserve has said it will keep its benchmark lending rate low through at least 2013, which means borrowing costs as a whole should stay accommodative.

"You'll see policy rates in the U.S. and Europe floored at or near zero," says Mohamed El-Erian, CEO of Pimco, owner of the world's largest bond fund, according to Bloomberg.

"I don’t think there will be any appetite or need to raise interest rates in the U.S. and Europe."

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