Percentage of student borrowers more than $20K in debt has doubled since 2002
Inside Subprime: August 17, 2017
By Caroline Thompson
According to a study released Wednesday by the Consumer Financial Protection Bureau, the number of Americans with $20,000 or more in student loans has doubled in the past 15 years. In 2002, this group made up just 20 percent of all student borrowers, but today, that number has jumped to 40 percent. About 44 million Americans currently owe a collective $1.4 trillion in combined private and federal loans, with the bulk of this debt being federal.
The CFPB also found that 30 percent of student borrowers are not paying down their loan balances after five years of repayment, up from 16 percent in 2001. This means that many borrowers who make monthly loan payments are essentially paying down interest as it accrues, and not actually tackling the principal balance, which stays the same or grows larger with each passing month.
Most than 60 percent of borrowers in this situation are considered delinquent, despite the availability of income-based repayment programs that allow them to make small or even zero-payments while still keeping up on their loans. This is likely because student lenders like Navient and Sallie Mae have been for years pushing student borrowers towards high-interest payment or deferment plans that increase the chance of default, and away from these federally mandated programs. There are currently lawsuits pending in both Illinois and Washington state addressing this issue, but for now, many borrowers feel powerless against their ever-mounting piles of debt, and this is causing a cultural shift in employment practices.
A growing number of employers are banding together to help employees pay off student loans. Many companies are now offering loan repayment assistance as a part of their employee benefit package, directly tackling some or all of an employee’s monthly student loan payments. These programs can save employees hundreds or even thousands of dollars in interest payments throughout the life of the loan. As the CFPB report states:
“For example, with a 10-year, $30,000 loan at 6 percent interest, an employer paying $100 a month will save the borrower more than $11,000 over the life of the loan. Alternatively, borrowers may free up cash by using their benefits to replace all or a portion of their monthly student loan bill. However, today’s report also warns that many of the most vulnerable borrowers – for example, those in default – may not have access to benefits offered under a typical employer program.“
Borrowers struggling with student debt can visit consumerfinance.gov/students to learn about their repayment options and gain access to valuable money-managing resources. For more information about student loan consolidation, click here.