The default total has risen over the last decade because of industry practices that are similar to those that led to the subprime housing collapse. A large portion of the student loan boom that took place from 2005 to 2008 was financed by Asset-Backed Securities (ABS), and because more money could be made off such loans, lenders became more aggressive in their lending practices. Increased profits gave lenders “an incentive to increase loan volumes” with “less incentive to assure the creditworthiness of those loans.” Lenders relaxed their lending requirements, lowering the minimum credit score required to secure a loan.
How The Private Student Loan Industry Resembles The Subprime Mortgage Market | ThinkProgress
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