The private student loan industry generated huge profits for lenders and investors for many years. Over time, however, the defects in these expensive, unsustainable products became clear and the loans began to fail. The industry hit a wall, exposing the risks of making unsecured, expensive loans to borrowers with little or no ability to repay.
There are some signs of a market recovery and the remaining lenders seem to have learned some lessons. Most have reduced their origination volume and re-evaluated underwriting criteria. The shape of the future depends to a large degree on how the federal government responds. If the government chooses to bail the lenders out by purchasing large portions of bad debt, the lenders will suffer no consequences for their irresponsible actions. They could return to irresponsible lending. This is even more likely to occur if Congress fails to impose stricter regulations going forward.
See all resources related to: Student Loans