Thanks to United States’ student loan program that have spurred heavy lending to Americans crossed $trillion mark and now stands much larger than the mortgage loans were back in 2007-08, which finally led to global financial crisis and melt down.

Worrying part is, which have been covered by media from time to time since last year that defaults or postponement in this segments are on the rise. As of latest data 22 million Americans have taken education loan and about 43% of them have either defaulted or postponed their payments. Among this 22 million, 3.6 million are a year behind in their payment and 3 million have secured postponement through appeal, which have been granted due to economic hardship.

As U.S. Unemployment rate has fallen to 4.9%, which can be considered as long term normal level, then why the Americans still suffering hardship and if they are not then what the size of willful defaulters is.

There is a significant built up of risk in this segment, which if not addressed, may not threaten the whole system but pose significant loss for the banks. Number of derivative contracts written on mortgage backed securities were larger than those written on student loans.

And we do worry, when the default amount is heading towards $250 billion.