According to the Market Statsville Group (MSG), the global student loan servicing market size is expected to grow from USD 3,913.0 million in 2022 to USD 6,417.4 million by 2033, growing at a CAGR of 4.6% from 2023 to 2033
The student loan servicing market is primarily driven by the increasing number of students opting for higher education and the subsequent need for financial aid in the form of student loans. As education costs continue to rise, more students are turning to loans to finance their studies. This has led to the growth of the student loan servicing market. The government's role in student loan financing is also a driving factor for the student loan servicing market. For instance, the U.S. Department of Education provides funding for federal student loans, which are then serviced by private companies. The government's involvement in student loan financing ensures that there is a steady flow of funds into the market, thus creating opportunities for student loan servicing companies.
Student loan services have a well-defined role in developing and developed countries. The goal is to deliver the client with initiatives to enhance services and business. With the surge in demand for smart devices and the rise in adoption of digitization, the companies and organizations have been continuously implementing technological advancements to enhance their service to cater to their partnered clients' needs. Additionally, student loan services are designed to give students a better financial understanding of the principal amount, the position of information on both payments and the amount to have remained and the economic potential of the organization of a business. With digital services, customer engagements are more user-friendly, driving the market’s growth. Therefore, the rising spending on digital technology due to the significant rise in the number of smarts strengthens the demand for student loan services. Further, the key market players focus on innovation in the service offerings with better quality assurance; thus, they have tremendous growth opportunities in the forecasting period.
In response to the pandemic, many governments around the world have introduced measures to help individuals and businesses affected by the economic downturn. Some of these measures include temporary suspensions of student loan payments or interest accrual, impacting the student loan servicing market. The economic fallout from the pandemic has led to job losses and financial hardship for many individuals, making it difficult for them to repay their student loans. As a result, there has been an increase in student loan defaults, which has created more demand for student loan servicing companies. Further, the pandemic has forced many companies to adopt remote work policies to comply with social distancing guidelines. This shift has impacted the student loan servicing market by increasing the demand for digital solutions that enable remote loan servicing and payment processing.
There is a rise in demand for student or education loan services due to increased higher education and foreign education globally. For instance, almost 4.3 million students, irrespective of their home country, study at a university level. In descending order, Australia, the United Kingdom, Switzerland, New Zealand, and Austria have the largest percentage of international students. The introduction of various technologies and courses fuelled foreign education, favourably affecting student loan services. The developed nations, including the USA, and Europe, provide varied services under student loans to attract students from various countries across the globe. The student loan and related services indirectly support countries to strengthen their economy and improve their education system and develop a strong position in the global market. Moreover, according to the 2019 Open Doors Report on International Educational Exchange, the total number of international students is 1,095,299, a 0.05% rise since the previous year. International students account for 5.5 percent of the overall higher education population in the United States.
According to the US Department of Commerce, international students contributed $44.7 billion to the US economy in 2018, up 5.5% from the previous year. The demand for foreign or higher education is also due to the industrial requirements and to get more employment opportunities in developed economies, especially in technology-based courses and jobs. Various key players that offer the loan, either government, private, or companies, developed new technologies or software to offer student loans and make the loan sanction process easy and encrypted to cater to the customers' needs.
With the increase in demand for a student loan, various lenders suffered debt and related problems, globally, inflation and unemployment are the major reasons behind the increase in debt, which affects the student loans market adversely. According to educationdata.org data, Student loan debt in the United States totals $1.73 trillion and grows six times faster than the nation’s economy. Moreover, approximately 42.9 million Americans with federal student loan debt each owe an average of $37,105 for their federal loans. The rising debt is a major roadblock in the pathway of the student loan services market, it hinders market growth and affects the overall GDP. The Australian government also suffers a student loan debt average of around $23,280, as per the data from aph.gov.au. Various countries suffer, including California with an $36,351 average Federal student loan debt, Michigan with $35,819, New Jersey with $35,095, Oklahoma with $31,376, and more. Many countries charge different ways to collect loans, but the results are futile due to economic conditions. Student loan debt is accelerating so fast that it has become a burden on any economy.
Since the last few years, the demand for student loan servicing has been growing rapidly considering the global scenario. The growing adoption of smart devices coupled with the rise in digitalization fuels market growth in the upcoming years. Digitalization and access to digital financial services have overcome challenges that impede youth from accessing and using financial services, such as physical infrastructure barriers or high costs, by offering convenient, faster, secure and on-time transactions and adaptation to meet individual demands. When delivered responsibly within a secure infrastructure, digital financial services can help the financial system and individuals be more resilient during times of crisis. The opportunities provided by digital means for individuals and businesses to continue accessing and using student loans and services are important and relevant in the current environment, as governments worldwide respond to the health, social, and economic factors of the COVID-19 pandemic. Today, every child and young person has access to personal digital devices such as smartphones, tablets and others. The increase in demand for digitalization and surging penetration of aforementioned smart devices creates a lucrative growth opportunity for the market.
The study categorizes the student loan servicing market based on type, and application area at the regional and global levels.
Based on the product type, the market is divided into a private loan, and federal loan. The federal loan segment is expected to dominate the market share with 64.4% in 2022 in the global student loan servicing market. As federal loans represent a significant portion of the student loan market, companies that specialize in servicing these loans have a significant advantage. These companies have the expertise and resources to manage the complex servicing requirements of federal loans, which has helped them capture a large market share.
Based on the regions, the global student loan servicing market has been segmented across Europe, North America, the Middle East & Africa, Asia-Pacific, and South America. North America is projected to account for the highest market share in 2022. The federal government in the United States plays a significant role in student loan financing, with many federal loans being serviced by private companies under contract with the government. This has created a significant market for student loan servicing in the region. North America has a large number of students pursuing higher education, which has resulted in a significant demand for student loans. As a result, there is a large market for student loan servicing in the region.
The student loan servicing market is a significant competitor, and extremely cutthroat in the sector are using strategies including product launches, partnerships, acquisitions, agreements, and growth to enhance their market positions. Most sector businesses focus on increasing their operations worldwide and cultivating long-lasting partnerships.
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