Credit Risk

Federal Student Loan Debt – What’s the Impact on Your Portfolio?

Federal Student Loan Debt – What’s the Impact on Your Portfolio?

November 17, 2023 | Maria Urtubey

Take the full capacity of the largest college football stadium (“The Big House” at the University of Michigan at 107,6001) and multiply that by 400.¹ That amounts to about 43 million individuals - which also represents the number of consumers holding federal student loans.²

That is a lot of people. And they hold over $1.6 trillion in federal student loan debt.³

Are federal student loan borrowers in your loan portfolio? The answer is a very likely yes – even if they do not hold any student loan debt at your firm. In fact, about 20% of a typical bank’s customers (or credit union’s members) hold federal student loan debt at another lender.⁴

More debt relief programs are now in place which is a huge financial help to some. But the vast majority of federal student loan borrowers are expected to make monthly payments on debts that had been paused during the pandemic.

The concern for lenders is that many federal student loan borrowers are financially stretched, and will be for years to come. They now have an extra debt commitment to add to their other loan obligations. Adding student loan debt to existing loans could result in an over 17% jump in monthly debt commitments.⁵

The key question for lenders is how will federal student loan debt impact their portfolio? 

Even with the addition of this new debt commitment, some student loan borrowers will be able to meet all of their debt obligations. Others may be forced to decide which payments to prioritize. They may choose to make payments on some of their loans (like auto for example), and let balances pile up or revolve for other debts (such as credit cards). This could result in increased risk for lenders.  

Now is the time for lenders to take action – before potential delinquencies and defaults creep up. The first step for lenders is to determine which of their customers have federal student loans. Then, they can take additional steps to better understand the financial health of those consumers and evaluate the impact that federal student loan debt may have on their portfolio. For example, lenders can:

  • Strengthen account reviews with more data

  • Examine portfolios more frequently

  • Take a broader look at borrowers’ resilience to meet all of their debt commitments  

Check out the infographic to better understand why federal student loans could create risk for your portfolio. Go deeper with a free consultation with our risk advisor experts by emailing Discover more tips about how to enhance your portfolio analysis in our Student Loan Repayment Risk, How to Get Ready blog.

  1., July 17, 2023.

  2. New York Times, November 11, 2023.

  3. New York Times, November 11, 2023.

  4. Equifax analysis. Results may vary based on actual data and situation.

  5. The student loan crisis white paper, Shur℠, Equifax, and VantageScore®, July 2022.

Maria Urtubey

Maria Urtubey

Risk Advisor

Maria joined Equifax on May, 2022, but has more than 20 years of experience supporting global companies in pioneering AI, analytics and data consultancy engagements. She has worked closely with financial institutions of all sizes, including start-ups as well as the major players in the Americas, Europe and Asia Pacific[...]