Student loan lenders aggressively courted Ivy League borrowers - but now it's backfiring
REUTERS/Brian Snyder
But Ivy League grads are proving more shrewd at managing their debt than anticipated, preventing borrowers from collecting high interest, the Wall Street Journal reported.
These grads not only pay off their debt quickly, they aggressively refinance when they can get lower interest rates.
Online lenders initially targeted Ivy League borrowers for their qualities: good credit, relatively high income levels, and high levels of education. And to entice the students, online lenders offered lower and lower interest rates. Paradoxically, these are the exact traits now hurting the companies.
After graduation students are eager to refinance, further incentivized by online lenders' lack of fees to do so- unlike the federal government or major lenders.
On top of this, students are paying off their loans in advance, as much as three times faster than in the original terms of their loan, according to The Journal.
"It surprised me," Gary Lieberman, chairman of Darien Rowayton Bank, told the Journal. "The nature of these borrowers is that they really want to pay off their debt."
Student loan debt in the US has reached a staggering $1.3 trillion, and many refer to the seemingly inexorable levels of mounting debt as a mounting crisis. Student loan debt doesn't target all borrowers equally, however.
"Half of borrowers exiting school in 2011 attended a for-profit school or a 2-year college," a Brookings paper noted. "These borrowers represented 70% of defaults."
These defaults hurt lenders, delaying the recovery on their loan investments. But as it turns out, paying off loans too quickly can be damaging as well.
- I spent $2,000 for 7 nights in a 179-square-foot room on one of the world's largest cruise ships. Take a look inside my cabin.
- Colon cancer rates are rising in young people. If you have two symptoms you should get a colonoscopy, a GI oncologist says.
- Saudi Arabia wants China to help fund its struggling $500 billion Neom megaproject. Investors may not be too excited.
- Catan adds climate change to the latest edition of the world-famous board game
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- Tired of blatant misinformation in the media? This video game can help you and your family fight fake news!
- JNK India IPO allotment – How to check allotment, GMP, listing date and more
- Indian Army unveils selfie point at Hombotingla Pass ahead of 25th anniversary of Kargil Vijay Diwas
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market