WASHINGTON–The 20% of the 43-million Americans who are in default on their student loans was named among Nine Statistics That Shaped 2019 by Pew Charitable Trusts.
“This system is under pressure as more borrowers struggle to repay, a problem compounded by the complexity of the repayment process,” Pew Trusts said in its analysis. “The U.S. Department of Education reports that about 20% of borrowers are in default—typically defined as having gone at least 270 days without a payment—millions more are behind on their payments, and more than a million loans go into default each year.”
The failure to repay a student loan can have “serious financial consequences for borrowers,” reminded the Pew Trusts, including collection fees, wage garnishment, damage to credit scores and more.
“Even those who make payments on time sometimes encounter negative financial outcomes, including growing loan balances,” Pew Trusts stated. “This can happen if their payments do not keep up with the interest that accrues on their loans and at specific points in the repayment process, such as at the start, when interest capitalizes—that is, is added to the principal and increases the amount subject to interest charges. Many borrowers—both high- and low-balance—feel this financial burden acutely, even if they can avoid default.”
What the Research Shows
Pew Trusts added research on the pathways borrowers take through the repayment process, the decisions they make, and the barriers they encounter are limited, making it difficult for policymakers to develop evidence-based, cost-effective solutions to these and other challenges. For the full Pew analysis, go here.