Student loan defaults have improved dramatically since peaking in 2009, according to Moody’s Investors Service's private student loan indices.

Moody’s private student loan indices track nine years of credit performance data on over 60 private student loan securitizations rated by the agency, representing $39 billion in outstanding pool balance.

The indices showed that 4.8% of securitized private loans defaulted in 1Q11, a dramatic 35% decline from the peak rate of 7.5% in 3Q09. The 1Q11 also marked the fifth consecutive quarter of year-over-year decline of the annualized default rate index.

However, Moody's noted that defaults are still two times higher compared with what they were prior to the recession. "Although the index is now at its lowest level since first-quarter 2008, the rate is still more than two times higher than the 2004-06 average of 2.2%. Prior to 2007, the default rate index was at a steady state of 1.5% to 2.5%," Moody's reported.

Delinquencies have also shown a significant improvement, but Moody' analysts said that despite the recent declines, the delinquency rate remains well above its level before the recession.

The Moody's indices indicated that the 90-plus delinquency rate index dropped dramatically by 21% to 2.9% in 1Q11 from 3.6% in 1Q10 and has since stabilized. The first quarter marked the fourth consecutive quarter of year-over-year decline of the 90-plus delinquency rate index. However, the index is now more than two times higher than the 2004-06 average of 1.4%.

The rating agency noted that the improvement in delinquencies points to lower default rates in the coming months. This is because as fewer loans roll into later stage delinquency buckets, there are fewer that can default.

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