Student Loan Payment Resumption: Mitigate Risks

As advisors to risk managers in the banking industry, the team at Digital Matrix Systems understands the importance of managing credit portfolios effectively. With the upcoming resumption of student loan payments in September 2023, we expect lenders to encounter multiple scenarios among student loan borrowers:

• Diverse Risk Profiles - consumers with student loans span various risk tiers, generations, and credit products, and their balances and payments have grown over time.
• Payment Shock Impact - consumers expected to experience payment shock are mostly non-mortgage holders who had been in repayment previously.
• Impact on Non-Mortgage Holders - Non-mortgage holders are anticipated to face a higher percentage of payment shock, whereas mortgage holders are expected to have higher overall payments.
• Delinquency Trends - consumers with student loans are more likely to be delinquent on unsecured credit.

To navigate this changing landscape effectively, we suggest the following action items:

1. Understand Exposure - gain a comprehensive understanding of your exposure to student loan borrowers within your portfolio.
2. Assess Repayment Ability - evaluate the ability of student loan borrowers to repay their debt in light of the upcoming changes.
3. Conduct Regular Portfolio Reviews - institute regular reviews of your portfolio to monitor and assess potential risks effectively.
4. Incorporate Attributes - integrate relevant attributes into your credit lifecycle to better manage student loan-related risks.? The DMS Summary Attributes library contains over 130 attributes (including Trended and Deferred) that focus on student loans.
5. Update Outreach Strategy - enhance your pre-delinquency treatment and outreach strategy to support borrowers during this transition.

By utilizing our student loan attributes and analysis, you can proactively address the challenges posed by the resumption of student loan payments may pose to your portfolio. Our team can collaborate with you to perform an analysis that will empower you to adapt risk management strategies, tailor customer engagement, and implement effective mitigation measures.

Contact us to learn more and schedule a brief consultation.