The paper attempts to isolate borrower characteristics that help determine who is more likely to default on their student loans, though it doesn't go into detailed explanation of why some are more likely than others. For those who entered repayment in 2005, 57 percent have had periods where they did not make expected payments, according to the study. Whatever the cause, delinquent student loans aren't a rarity. Sometimes loans are simply forgotten about in the haze of post-school transitions. The reasons for lack of payment are varied: Sometimes it's economic hardship, sometimes it's lack of knowledge about how loan repayment works. And while large lenders don't suffer the same strain as the individual in default, it's still bad for business since lenders lose an income stream and may become involved in lengthy legal actions if they attempt to collect the debt. It can lead to damaged credit, garnished wages (for defaulting on federal loans), not to mention a mountain of stress. According to the study, for people under the age of 30, the share who were late on their payments climbed to 35 percent in 2012, up from 20 percent in 2004.ĭefault is bad news for both borrowers and lenders. “Increases in student borrowing and default rates raise concerns that some students may be borrowing too much,” according to a new paper from NBER, which takes a look at student-loan debt and instances of student-loan-debt default in an effort to uncover the best approach to repayment for both borrower and lender.Īlong with the growing cost of tuition is a growing group of former students who have difficulty making their payments on time, or at all. Is There a Better Way to Deal With Student-Loan Debt?īut even though the cost of tuition is rising, borrowing more money to bridge the gap can become problematic.Growing debt is largely the result of climbing tuition prices, which lead many students to lean more heavily on borrowing than they once did. In the 2011-2012 academic year, 10 percent of college graduates had more than $50,000 in student loan debt-in 1999-2000 that number was only about 1 percent. ![]() The process of taking out student loans can be nerve-racking, but the reality of paying those loans back can be downright sobering-especially when a looming, large number suddenly becomes very real during the repayment period.īetween 20, the share of 25-year-olds with government and/or private-student-loans climbed from 25 percent to 45 percent.
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