How to find a student loan lender
Student loan debt is becoming more of a burden for Americans, and that’s leading to a significant rise in defaults, a recent report finds.
That’s not good news for borrowers, who may be facing high costs for their monthly payments and are forced to find ways to make their payments on time.
But while default rates have climbed steadily over the past decade, they’re still low.
The report, published Thursday by the National Consumer Law Center, found that in 2016, about 5% of borrowers had a default on their loans, compared to 6% in 2008.
It found that borrowers who defaulted on their student loans in 2016 had a higher chance of going into default, and the rate of default was higher for borrowers who did not have a bank loan.
The national average default rate, which includes borrowers with less than $150,000 in outstanding student loans, was 2.2%.
That rate was higher than the national average for borrowers with loans with a combined total of $250,000 or more.
While defaults are an issue for borrowers in general, they are especially high among borrowers with low income.
The percentage of borrowers with a default rate of 30% or higher was more than double the national rate, and was more common among people with incomes between $25,000 and $50,000.
In 2016, only about 15% of students had a repayment period longer than 12 months.
That rate is now more than 20 percentage points higher than it was a decade ago, according to the report.
About 8% of student loan borrowers in the bottom 30% of income earners have a default history, according the report, compared with 2% in 2014.
The federal government is expected to issue an estimate of defaults in 2021, and a report in February by the Congressional Budget Office found that the federal government would spend $5 billion to help students with their student loan payments.
But the CLC report suggests that those numbers could be low.
It says that the typical repayment period for a borrower who default on a student loans is less than three years.
That makes it unlikely that the rate will go down.
“Borrowers with loans that are in default could experience additional difficulties with their payments and could have difficulty repaying their loans,” the report says.
“Even if the federal student loan forgiveness program makes up for the lower rate of defaults by allowing borrowers to refinance, borrowers with higher monthly payments would be more likely to be able to make good on their loan.”