Over at Zero Hedge, Tyler Durden highlights the findings of a new FICO report on student loans (available at the very bottom of his post). With all the news stories about the crushing weight of student loans, it would be hard to underestimate the magnitude of the problem. And yet that is precisely what I’ve done. I don’t put a lot of weight on anecdotes and extreme outliers, so while I thought the student debt problem was bad and getting worse, I wasn’t prone to hyperbole about it.
Before reading the answer, ask yourself: Out of all the individuals with student loans, what percent has a student loan balance of greater than $100,000?
I would have bet good money that this figure was under 1%. I was way off. The FICO numbers show that it is actually 4.25% (the 0.8 from figure 3 divided by the percent with loans [100-81.2=18.8] from figure 1). It turns out I’ve been discounting these outliers too much – they aren’t nearly as rare as I thought.