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While often viewed as “good debt,” student loans may be among the most toxic liabilities, according to a recent report by the Wall Street Journal.

Unlike credit card debt, student loans cannot be discharged through bankruptcy. Nor can they be foreclosed upon, as in the case of an unaffordable mortgage. Still, about 60 percent of federal and private student loan debt is in default or deferment, according to the report.

A 2003 graduate from medical school, Michelle Bisutti has watched $250,000 in student loans grow to about $555,000. Full article…

Stricter norms related to unsecured lending have led to a decline in the demand of retail loans. As per the data, personal loans declined by 0.1 percent in the year up to October 2009 as compared to a 15 percent rise a year ago.

As per RBI, personal loans include loans for housing, credit card outstanding, consumer durables finance by banks, education loans and advances against fixed deposits. During the previous five years this segment has been the main growth driver for most entities.

To combat the credit crisis, banks formulated tighter norms for unsecured lending.

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Unlike other banks, that are slowing down on unsecured loans, HDFC, the largest mortgage lender in India, is aggressively selling unsecured loans such as credit cards and personal loans.

During the previous year, most lenders have seen rising defaults in their personal loans and have therefore stopped selling unsecured loans aggressively but HDFC has witnessed an increase of 8-10 percent in the second quarter of the current fiscal. The lender expects a faster growth in its personal loan book in the latter half of the year.

Parlay Mondal, Country Head, Retail Assets, HDFC bank, says, “”If there is opportunity in the market, why not take it.

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Pralay Mondal, country head retail assets and credit cards, HDFC bank said that around 30-35 percent of the credit card loans are bad. He refused to comment on HDFC’s delinquency rate but said that it was less than half of the industry numbers.

HDFC, the largest mortgage lender has 4.5 million cards that accounts for 18 percent of the total credit card market. Other players in the credit card industry include ICICI bank, SBI cards, Citibank, Standard Chartered.

ICICI banks head of retail assets, Vijay Chandok said that he could not comment on the default rates of the bank or the industry.

Banking analysts say that the credit card industry is beginning to stabilise.

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College students and their families have long used loans to help fund a university education, but these days more people are turning to private loans, according to a new report.

The Project on Student Debt says that during the 2007-08 school year, 14 percent of undergraduates took out private student loans, up from 5 percent who did so in 2003-04.

Furthermore, the group’s analysis found that nearly two-thirds (64 percent) of students who turned to private loans had not taken out all they could in federal Stafford loans, which have a lower interest rate and are typically more affordable.

“Private student loans are one of the riskiest ways to pay for college,” commented Lauren Asher of the Institute for College Access & Success, which runs the Project on Student Debt.

In the report, the project said that the growing reliance on private student loans is troubling because they typically have variable interest rates that can be as high 18 percent, lack the consumer protections of federal loans and usually cannot be discharged in bankruptcy.

Students at for-profit colleges had the highest utilization of private loans, with 42 percent using this type of financing. Full article…