The rising cost of education coupled with federal loan limits on direct lending presents a growing opportunity for private student loan funding in the long run, according to the panelists at the IMN's ABS East 2011 Student Loan panel.
The panelists estimated that the average college tuition rang in about $16,000. federal student loan limits were set at $5,500 and Pell Grant limits offer up to another $5,550, leaving a large funding shortfall that could be fill in the private market. There is a gap, said panelists and a need to access more capital.
However at the moment the continues weak labor market means trouble across all student loans. Panelists speaking at the event said that it was no longer a measure of willingness to pay but an ability to pay. In some cases borrowers may want to pay but just simply cannot pay the loan.
Despite the current high unemployment rate for college graduates, educational levels correlate with better long-term employment prospects. Unemployment rates, said the panelists were significantly higher for high school graduates and highest for those without a high school diploma.
One panelist emphasized that private student loan growth has been limited in recent years because originators have been primarily targeting borrowers with co-signers, high FICOs, and who have attended top schools.
Down the line panelists said that loans originated via the Straight-A funding program as well as auction rate loans are likely to work their way through the securitization market. "There is yield to be had in this segment of the market," said one panelists. "These are good products and more can be done to bring investors back to the table."