Student Loan Industry: An Industry for the Select Few, or for All?

January 30th, 2018

As part of our KG Prime market intelligence series, we recently examined and retrieved data regarding the student loan industry from a wide array of sources. Specifically, student loan debt grew to more than $1.3 trillion by year-end of 2016, up 6.3% from 2015. Overall, student loan debt increased about 13.5% annually, on average, since amounting to $252.9 billion in 2003. However, due to various major occurrences (e.g., the Great Recession), legislative changes (e.g., passage of REPAYE Act and reduction of FFELP loans), and the standard growth of the market, we’ve seen the public sector continually maintain a vast majority of market share every year compared to the private side, as shown by the graph below. As we discuss more thoroughly in on our in-depth market intelligence analyses on KG Prime, accounts receivable management (ARM) companies must be aware of both sectors because they both offer unique collection opportunities for companies interested in entering, or expanding, their student loan offerings. The public side offers higher potential for revenue generation, but only for a select few companies, which are awarded the various Department of Education (ED) collection contracts, or are subcontractors of these procurement contracts, whereas the private side maintains a much lower balance, but it’s comprised of vastly more lenders (e.g., commercial banks, credit unions, private lending financiers) with which ARM specialists may contract. In all, although the ED contract is highly valuable for the ARM industry, but only relevant to a select few, there are other segments of this market which may prove to be worthwhile to enter.

Looking at the graph below titled Total Student Loan Debt, this market grew significantly each year since 2003. Although the annual growth has slowly diminished over the 14-year period, the year-over-year increase has yet to fall below six percent, which is quite strong for a relatively mature industry. Much of this is driven by the public side, as mentioned previously, but even the private side amounted to over $105.6 billion in 2016. Additionally, the student loan market remains relatively consistent each year, and, barring major legislative changes, isn’t terribly vulnerable to major economic occurrences; whether there’s a recession or economic boon, student loan debts should continue rising strongly.

To access Kaulkin Ginsberg’s in-depth analyses on the student loans market segment, which includes observations of key economic indicators and regulations, among other insightful ARM-tailored information, please become a KG Prime member today by requesting a company code or contacting us at hq@kaulkin.com. Through KG Prime, you’ll gain access to a user-friendly and secure website full of in-depth M&A, economic, compliance, and market-related data and analyses tailored specifically to the ARM industry. Basic membership is free for ARM companies or others interested in the ARM industry.

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