A Portrait of the Student Loan Borrower: Older, Deeper in Debt, More Likely Delinquent

A CFPB report analyzes more than 1 million borrowers who began repayment from 2002 to 2014

The student loan debt crisis is worsening in ways that go well beyond the size of the debt that has ballooned to more than $1.4 trillion, according to a new report from the Consumer Finance Protection Bureau (CFPB).

(Related: Who’s to Blame for the Rise in Student Loan Debt and Defaults?)

More than 40% of borrowers leave school owing $20,000 or more, double the percentage from 2002, and the share of borrowers owing $50,000 or more has more than tripled over the same time period, from 5% to 16%.

(Related: How American Families Pay for College: 2017)

In addition, half of student loan borrowers are over 34 when they start to repay their loans, twice the percentage since 2003, and the share of borrowers who have failed to reduce loan balances after five years in repayment has also doubled, from 16% in 2008 to 30% in 2016.

(Related: Trump Education Department Now Allows Big Collection Fees on Defaulted College Loans)

Those borrowers may be making payments, but they’re not large enough to cover all the interest on their loans. So the interest accrues, leaving them with even more debt than they had when repayment began. The share of those borrowers rose to 12% in 2016, up from 8% in 2008.

“The Bureau’s research shows that people are taking on more student debt later in life, and having a tougher time paying it back,” said CFPB Director Richard Cordray in a statement. 

The report, based on analysis of more than 1 million anonymized credit reports of student loan broowers who began repayment from 2002 to 2014, found that "growing student loan amounts mean many borrowers will be affected by student loan debt much longer than in prior cohorts," according to the report.

Income-driven repayment plans can help student loan borrowers by reducing the size of required repayments while keeping them current on their loans, but less than half of borrowers with growing balances take advantage of them, according to the CFPB. As a result, 60% of borrowers who haven’t paid down their balances five years into repayment are delinquent on their loans.

Borrowers with small loan amounts are more likely to become delinquent, which suggests that they are not successfully accessing available alternative repayment options such as income-driven repayments and that the debt servicing delivery platform for them may be inadequate, according to the Securities and Exchange Commission.

The CFPB concludes that the repayment of student loans “has important implications not only for borrowers and holders of student debt — largely the federal government — but for other credit markets, as well.”

It recommends further research to study which recent borrowers go into delinquency despite greater availability of options to reduce payments as well as the longer-term consequences of more borrowers holding student debt for more years. In a related report, the CFPB lauds employer-based programs that helps student loan borrowers repay their debt. 

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