FICO Says Student Loans May Weigh Economy Down

Man with ball and chain around ankle
A survey commissioned by FICO expresses concern over the growing instability of the student loan market, and predicts future student loan delinquencies to weight the U.S. economy down.
Now that student loan debt has overtaken credit card debt with a total $750 billion outstanding, FICO’s survey revealed 67 percent of respondents expect delinquencies to rise.
“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, in a FICO news release. “A significant rise in defaults on student loans would impact as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they true to cope with their debt during these uncertain times.”
Respondents were also asked about the affect global economies may cause on the U.S. economic recovery. When asked about what they believe could cause a double dip recession for the U.S., 38.8 percent of respondents said the Eurozone debt crisis was the most likely trigger.
The survey also revealed a stunning 65 percent of respondents feel the global influence of Chinese consumers would overtake U.S. consumers within 5 to 10 years.
“Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”
FICO also reported the outlook on other lines of credit and financing. 47 percent believe mortgage delinquencies will rise in the next year, while 45 percent fear credit card delinquencies will rise. Auto loans were seen as the least volatile by FICO’s survey group, as only 33 percent expect those to rise.