Unfortunately, the bad news about student loan debt burdens keeps coming. The Education Sector recently highlighted a number of troubling trends, including:
From 1994 to 2009:
- The percent of graduates taking out loans increased from 42% to 62%,
- Median monthly loan payments as a percentage of monthly salary increased by 1.2% during this period. For the lowest income group of graduates, this figure increased from 13% to 34%,
- The percent of students paying more than 17% of their salary in student loan payments almost doubled to 19%.
In February, the Federal Reserve Bank of New York released new data showing the growth in student debt over the past decade. The Fed’s data shows that nearly one in three student loan borrowers are more than 90 days behind on payments. This is a large increase from 2004.
There are some problems with the Fed’s data. For example, it does not include borrowers who are able to postpone payments through deferments or forbearances or repay through income-based repayment. Regardless, we cannot ignore the Fed’s conclusion that student debt is the only kind of household debt that continued to rise through the Great Recession and has now the second largest balance after mortgage debt. Overall, the rapidly increasing student loan debt burden is approaching $1 trillion, according to the Federal Reserve Bank of New York data, including both federal and private student loans.
The Fed data shows that nearly one third of the borrowers in repayment are delinquent on student debt. Federal student loan borrowers in this group should look into options such as affordable repayment plans or deferments. There is a long period of delinquency (usually 9 months) prior to default for federal student loans. It is critical to learn about options during this time as it is very difficult (although not impossible) to get out of default and back into affordable repayment.
The situation for private loan borrowers can be much more difficult. There is no comprehensive law, as there is for federal student loans, requiring private student lenders to offer relief. The Consumer Financial Protection Bureau recently posted a request for comments on relief for private student loan borrowers. Comments are due April 8.