A data study run by MeasureOne Private Student Loan Consortium details promising feedback on private student loan performance of graduates and families throughout the United States. The overall summary of the reports tells us that private student loans are successfully being managed by borrowers due to positive trends since the 2008 crisis.
Just to clarify, this report focuses on private student loans, so it does not include federal student loans at all. The study includes data from the 2008 crisis all the way up to the first quarter of 2016. It does not include consolidated loans, and it specifically targets school-certified loans.
Late and early delinquency stages have decreased considerably since 2008. Early stage delinquency has declined 9% year over year; now 2.5% of private loans today are in early stage delinquency. Late stage delinquency accounts for 1.9% of private loans today after a 16.8% year over year decline. Late stage delinquency is defined as over 90 days past due on payments. Early stage pertains to payments past due by 30 to 89 days.
Graduate loans appear to have a lower delinquency rate overall compared to undergraduate loans. Late stage delinquency rate for graduate loans is 1.1% while the same rate for undergraduate loans is 2.1%. Early stage delinquency rate for grad loans is 1.6% compared to 2.6% for undergraduate loans.
Private loan forbearance, a period where no payments are made while interest accrues, is also on the decline. Since 2011, forbearance status has declined by 26.6%. Today, 2.2% of private loans are in forbearance after a year over year decline of 4.1% since 2008.
The overall school certification for private loans is excellent. As of now, 99.3% of private loans are verified and delivered effectively to the university or college. One of the findings of this study is a positive correlation between school certification and private student loan performance.
These are very promising trends that certainly bolster confidence in private student loans. Keep in mind that private student loans account for only 7.5% of total student loans; the rest are federal. Private loans account for roughly $102 billion of the $1.35 trillion of outstanding student loan debt.
This study sheds light on private student loan potential compared to federal student loans. There are many key aspects of private lenders in this industry that the federal government lacks such as lender competition, flexible initial repayment options, simple refinancing options, etc. The private student loan marketplace is market driven while federal student loans often have fixed rates and less flexibility. This study certainly serves the argument for private student loans well.