Yahoo Finance Over one third of student loans are in danger of default
Millennials are facing an avalanche of student loan debt along with other large swaths of the population who decided to go back to school after the financial crisis. The ease of obtaining such loans rose dramatically when the U.S. government began guaranteeing nearly all student debt in 2010.
Unfortunately, many students never graduated and are now saddled with the burden of their debt, but without the upside salary benefits that come with a degree. According to the Department of Education and the National Center for Education Statistics, 41% of students entering school in 2006 failed to graduate after six years. Similarly, for the subset of private, for-profit schools, 68% of students failed to graduate.
Currently, only 6% of student loans are technically in default. However, loans in several other categories are in danger of repayment, which suggests the problem is much bigger.
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The Federal government has granted temporary reprieves to large categories of borrowers through forbearance and deferment programs that are essentially loan modifications. When including these tranches of loans along with those that are delinquent by at least 90 days, the number of student loans in payment jeopardy rises to 36%.
Several avenues of loan reprieves have been granted by the Department of Education, such as the Pay as you Earn Plan (PAYE) and the Income-Contingent Repayment Plan (ICR Plan). This month, it announced two more plans, one called Revised Pay-As-You-Earn Repayment Plan (REPAYER), and another specifically for students of Corinthian Colleges. But these measures are criticized as ad hoc and non-inclusive. Accordingly, Congress is under increasing pressure to enact sweeping, comprehensive reform.
