According to a report released on Monday, only four out of every 10 people with direct student loans are currently paying them back. Many of the 27.8 million student loan borrowers with the newer direct federal loans aren’t yet required to make payments as about 35 percent of those are either still in school or in a six-month grace period after graduating, according to the report.
However, about 18 percent of those borrowers are in programs that are designed to help those who are distressed or those who are returning to school. The report indicates that about 8 percent of the borrowers are in default, meaning the borrower has failed to make payments for at least a year, the report indicates. The report was released by the Consumer Financial Protection Bureau.
The report suggests that a significantly high number of borrowers cannot afford to repay their loan debt. Additional data included in the report indicates that among those who direct federal student loans are in the repayment cycle, more than 22 percent are either in default or in forbearance. Forbearance is a program that allows borrowers to postpone payments for a specific time period, most often for financial reasons.
The newly released report is being considered the first comprehensive outlook at the outstanding $569.2 billion worth of student loans. The federal direct student loan program began three years ago, in 2010, when the government stopped guaranteeing loans that were made by private lenders, such as Sallie Mae. The new program expanded rapidly as many Americans enrolled in colleges during the weak job market and economic crisis.
The Education Department traditionally had reported only defaults that occurred within two to three years after a borrower left school, which was a method that critics said provided too narrow timeframe to thoroughly examine the strains of the loan program. According to the Consumer Financial Protection Bureau, nearly 23 million borrowers owe $429.5 billion in FFEL loans. Many borrowers owe both, direct federal and FFEL loans.
The bureau’s estimates indicate that the federal student loan balances currently exceed $1 trillion, and with the addition of private loans, the balance approaches $1.2 trillion. The report has impacted an already growing concern about student loan programs and their long term costs, as taxpayers pick up the tab when borrowers default. As for the moment, the government earns money on student loans, but some economists are warning those earnings will disappear in the next several years as the defaults continue to increase.
For comments and suggestions, leave a message in the comments section below. Like and Follow our Facebook page for more stories and to stay up-to-date with the latest happenings.