“For many, the payments are proving unmanageable.”
This number is going up and is expected to hit 40 percent of borrowers by 2023.
More than 1 million people default on their student loans each year
More than 1 million student loan borrowers each year go into default.
Outstanding education debt in the U.S. has tripled over the last decade and now exceeds $1.5 trillion, posing a greater burden to Americans than auto or credit card debt.
For many, the payments are proving unmanageable. By 2023, nearly 40 percent of borrowers are expected to default on their student loans. That’s when a person has not made a payment toward their education debt in roughly a year, triggering it being sent to a third-party collection agency.
What kind of student loan borrowers are at risk of defaulting? And what’s the financial impact on them of doing so?
A new report from the Urban Institute, a progressive think tank in Washington, D.C., answers these questions. The researchers analyzed the fates of borrowers who entered repayment in 2012.
Who is defaulting on their student loans?
Federal loans come with a lot of protections that should make default rare, said Kristin Blagg, a research associate at the Urban Institute, focusing on education.
However, she learned, that is not the case: Within four years after leaving school, nearly a quarter of the borrowers had defaulted. “To default is still pretty common,” Blagg said.
She added, “I found that these are borrowers who tend to be in financial distress.”
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