The default rate of securitized private non-guaranteed student loans will be stable but high this year, according to a report released by Moody's Investors Service this morning.
Based on the rating agency's Private Student Loan Indices, it said that the default rate index ended 1Q12 at 4.9%, which is nearly flat with the 5.0% in 1Q11.
The default rate index was 4.9% in 1Q12, which is close to flat with the 5.0% in 1Q11, Moody's stated. The index has been around 5% since mid-2010. Although it is 36% less than the record high of 7.7% it reached in third-quarter 2009, the index is still about twice as high as it was prior to the recession.
Defaults will stay stable but high given the 8%-9% unemployment rate, which is student loans defaults' key credit driver. Analysts warned that these will not improve considerably until unemployment returns close to pre-recession levels in 2015-2016.
The default rate for 2006 to 2010 securitizations, which are largely loans to students graduating into a weak job market, remains worse versus that for older securitized deals.
Ninety-plus delinquencies were a little less in 1Q12 than in 1Q11. But, the improvement was not sufficient to change the rating agency's forecast that 90-plus delinquencies will stay close to current high levels for the rest of the year, Moody's said.