Consumers are having more trouble paying back student loans, adding to problems seen with home and car debt.</p>
<p>Signs of stress can be seen in two realms of U.S. student debt: loans under federal programs, which are ultimately backed by the government, and the smaller but fast-growing world of private loans issued by banks and other firms.</p>
<p>Defaults appear to be rising on federal-program debt, which carries the lowest interest rates. Such debt is guaranteed by intermediary agencies, whose losses are in turn generally reimbursed by the federal government.</p>
<p>The largest guaranty agency, United Student Aid Funds Inc., said it saw a 22% increase in default claims in its fiscal 2007, which ended in September, compared with the previous year. That was after adjusting for factors that included an increase in total loans and defaults resulting from Hurricane Katrina. United Student Aid guarantees about a quarter of the federal-program loans, which totaled about $100 billion last year.</p>
<p>“The problem is not excessive borrowing from the federal programs,” said Robert Murray, a spokesman for the company. “What is really impacting these borrowers is the private debt that they’re taking on, in addition to their federal student loans.”</p>
<p>Another guarantor, American Student Assistance Corp., said it has seen a 14% increase in its annual default rate in 2007 compared with the previous year. Michael Ryan, the vice president of borrower services, said he didn’t consider that to be a large rise. Defaults rose to 1.12% from 0.98% on an annual basis.</p>
<p>Concerns about rising private-loan defaults surfaced this week at First Marblehead Corp., a Boston company that packages private student loans made by banks into trusts that issue debt to investors. On Friday First Marblehead said that “uneconomic terms in the current capital markets” meant it wouldn’t be able to arrange any securities offerings in the current quarter. The company receives about 80% of its revenue from putting together such offerings.</p>
<p>Moody’s Corp., the credit-rating service, is considering a downgrade of notes First Marblehead has packaged previously. Loans the company packaged together in 2006 appear to be defaulting at roughly double the rate of those assembled in 2005. The company’s shares fell 41% this week to $17.85 in 4 p.m. composite trading Friday on the New York Stock Exchange.</p>
<p>The biggest student-loan player, Sallie Mae, officially known as SLM Corp., said that in the third quarter, charge-offs in its private loan portfolio were $110 million, more than double the amount a year before. Sallie Mae’s private student loans total $28 billion.