Student Loan Delinquency: A Big Problem Getting Worse? by Juan M. Sánchez and Lijin Zhu in Economic Synopses, 2015, No. 7. St. Louis Fed.
“A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment. Over the past decade, the percent of student loan borrowers who are not making their debt payments on time has increased significantly. This trend has generated a large debate because the government subsidizes a very significant share of that debt. This essay analyzes the evolution of some key statistics relevant to this debate. The conclusion? Student loan delinquency is a big problem, but it is not getting worse. The first figure shows delinquency for student loans: debt that is 30+ days delinquent. To avoid any seasonal variations, only information for the last quarter of each year is included; the last information available corresponds to 2014:Q4. The red line in the figure represents the 30+ days delinquency rate for student loans. Borrowers are included in this group if they are at least 30 days delinquent on at least one of their student loans. The delinquency rate increased significantly over the past 10 years—from 11 percent to slightly above 17 percent. Delinquency was monotonically increasing before reaching 15.8 percent in 2010. Thus, about 77 percent of the increase over the past 10 years occurred between 2004 and 2010. The delinquency rate decreased during 2011 and then increased sharply during 2012; since then it has remained quite stable at about 17 percent. Given the previous analysis, we conclude that the delinquency rates are high, but the evolution over the past 10 years seems less problematic. To further analyze student loan delinquency, and given that many programs allow borrowers to postpone repayment on their student loans, it seems pertinent to study a measure of the share of loans not in repayment…The findings shed light on the characteristics of the student loan borrowers struggling to repay their debts and provide practical policy guidance for redesigning student loan programs..”
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