Delinquency: The Untold Story of Student Loan Borrowing

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Institute for Higher Education Policy

Forty-one percent of federal student loan borrowers who started repayment in 2005 have either defaulted on their loans or have been delinquent on their loans at some point, according to this report.

The study found that although 15 percent– or 258,404 students representing $3.2 billion in loans – actually defaulted on their loans, the percentage of people who have trouble repaying their loans, but never actually default, is much higher.

Twenty-six percent – or 454,000 borrowers, representing $8.5 billion in loans – were delinquent at some point, but never defaulted.

The information in the study was gathered from five large student loan guaranty agencies: American Student Assistance, ECMC, Great Lakes Higher Education Guaranty Corporation, Texas Guaranteed, and USA Funds.

IHEP examined students who borrowed money to pay for higher education and their ability to pay back their loans within a five-year period. The study focused on the nearly 1.8 million borrowers who entered repayment in 2005.

This means that more students are having difficulty repaying their loans in a timely fashion than is generally recognized when the focus is on the default rates alone, the report said. According to the study, three quarters of a million borrowers who entered repayment after only one year had difficulty.

According to the report, rising college prices, stagnating family incomes and the economic downturn all resulted in student loans and grants playing a larger role in supporting students’ access to and success in college. Federal loans are the largest source of financial aid available to undergraduate and graduate students.

Click here to read the report.

  • Emily Morgan

    Borrowers who graduate are less likely to be delinquent, but many do have difficulty repaying. This is particularly true for students at community colleges and for-profit institutions. At public two-year institutions, 42% of borrowers who graduate are delinquent at some point in their first five years of repaying, though only about 10% of the students at community colleges borrow in the first place. At for-profit two-year institutions, about 57% are delinquent or default despite graduating, and the overwhelming majority of students at these institutions borrow. Both kinds of college tend to serve low-income, first-generation and nontraditional students, who tend to be relatively uninformed about cash advance borrowing in general.