Student Loan Write-Offs Surge
"Equifax, one of the nation's three major credit bureaus along with Experian and TransUnion, has found a steep rise in the write-off of student loans this year," Main Street reports. "Between January and August of 2013, lenders wrote off $13.6 billion in student loan debt--private and federal--a 46% increase from the same period in 2012 and the peak amount at any point during the last eight years, according to Equifax data. The totals are derived from the number of loans owed by people filing for bankruptcy or whose loans are in the collection process. ... Amy Crews Cutts, chief economist at Equifax told American Banker that a recent increase in delinquent balances is consistent with an increase in overall student loan volume. Though the dollar amount of the delinquencies is up, student loans 60 or more days overdue have remained at around 6% to 8% of the total for last last eight years. Banks have, for the most part, left the student loan business. Would a rise in write-offs mean that the student loan crisis is beginning to hurt the remaining private lenders? While the number of defaults are unacceptably high and are a blight on borrower credit scores--not to mention purchasing power--a study by MeasureOne, a San Francisco vendor that analyzes student loan data, found the private lenders to be in good health. ... Sallie Mae, which makes about 50% of private loans, saw its stock increase by about 40% during 2013. In a December SEC filing the company announced a 2014 1Q dividend on its Series A preferred stock of 87 cents a share. Discover Financial reached its 52 week high on December 31--$56.20 off a low $37.24. Zack's Equity Research cited "curbing interest rates" on student loans as a factor that should help drive the numbers of Discover Financial. Wells Fargo has $22.4 billion in student loans on its books — not chump change — but only 1.5% of its total assets. It pays shareholders a 2.64% dividend of $1.20 per share. Other private lenders include the First Marblehead Corporation, PNC Bank, RBS Citizens, and SunTrust Banks. When it comes to student loans, Uncle Sam is by far the biggest bag holder."
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