Student Loan Servicers Will Be Rewarded for Good Behavior
In 2015 CFPB surveyed over 30,000 borrowers and uncovered several atrocities involving their loan servicers. Such as, lost paperwork, failing to tell graduates how to consolidate loans, and how to change their repayments plans.
A blog post from Credit.com has recently revealed some chilling news about the default rate of student loans. “The Wall Street Journal’s Josh Mitchell recently authored an article in which he calls attention to the roughly 16% student loan debt default rate, as measured in terms of number of borrowers. That data point, by itself, is extraordinarily high. In proper context, it’s calamitous.”
The blog post goes on to explain in detail why in fact the rate is truly calamitous, “At $125 billion in aggregate value, these defaulted loans represent roughly 10% of all student loans that are currently outstanding — and roughly 13% of those that are government-guaranteed. Yet only about half these debts are actually in repayment (because the other half represents deferred borrowings for students who are still in school). As such, that 10% (or 13%) is really closer to 20% (or 26%).”
Student loan default rate has single-family mortgages beat by almost double during its height during the 2008 economy collapse. The Credit.com post notes that this metric can even be misleading as well. Noting that all other forms of consumer and commercial debts default when payments are 91 or more days past due. However, government-backed student loans do not result in default until they are at least 270 days past due.
The Federal Reserve Bank of New York in their most recent quarterly report on Household Debt and Credit stated that student loans represent 11% of all of the outstanding education debts. The post notes that if this number is correct then we are actually looking at a number that doesn’t include loans already in default that the default rate looks more like it falls between 40% and 50%.
An incredibly eye-opening number of people are past due and defaulted and may not know how to handle their student loans but there are ways to prevent going into default even if you are seriously delinquent in your payments. Look into options like deferment or forbearance, you can apply for a forbearance through most loan servicer’s websites. This would result in bringing your account to a current status. Don’t become one of 40-50% of borrowers, stay on top of your student loans and stay out of default.
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