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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.

By Heather Anderson | Updated on May 20, 2013
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.

Those numbers could make credit unions, still smarting from corporate credit union mortgage -backed security losses and loan losses on their own books, shy away from the private student loan market in a time when the loans are one of the few products with consumer demand.

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