Skyrocketing student loans threaten to suffocate lending’s future
Student loan balances are exploding at an alarming rate. The pace threatens to cripple credit scores and destabilize the entire retail lending market. Will banks and credit unions be able to lend to overleveraged consumers carrying massive student loan balances? And how will the crushing weight of debt impact Gen Z's feelings about home- and auto loans?
Few banks in the United States are willing to dabble in the student lending space.
“Most banks wouldn’t give 17-year-olds $10,000,” said Christine Roberts, head of student lending at Citizens Bank.
Citizens Bank is the exception. That’s because student lending is a risky business. Young students have limited credit history, loan amounts can be substantial and the risk of default is real. Even if students could get their parents to co-sign, many of banking providers – including big banks like BofA and Capital One – won’t touch student loan applications.
At the start of 2021, over 44 million Americans owed more than $1.71 trillion in student loan debt, amounting to almost 11% of all consumer debt in the U.S. — roughly $739 billion more than the total of all credit card debt.
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