It may come as no surprise to many lenders that the percentage of student loan borrowers leaving college with more than $20,000 in debt has doubled during the past decade, according to a report released by the Consumer Financial Protection Bureau (CFPB), titled “CFPB Data Point: Student Loan Repayment.”
The report analyzed credit reports from more than 1 million student loan borrowers who began repaying their loans between 2002 and 2014, as well as their repayment experience through 2016.
“The bureau’s research shows that people are taking on more student debt later in life, and having a tougher time paying it back,” CFPB Director Richard Cordray said in a press release. “Many employers have taken notice and are developing student loan repayment programs to assist employees in tackling their student debt. Our recommendations are aimed at helping employers ensure these innovative programs deliver their intended benefits.”
Cordray’s remarks refer to a separate report featuring numerous recommendations the bureau compiled to help employers and other companies that manage benefits programs maximize the benefits such programs provide borrowers, titled “Innovation Highlights: Emerging Student Loan Repayment Assistance Programs.”
The findings indicate that more than 40 percent of student loan borrowers left school with student debt totaling $20,000 or more, 30 percent were not paying down their loan balances after five years of repayment and about 50 percentage of borrowers do not begin repaying student loans until after the age of 34, which is double the percentage of roughly a decade ago. Conversely, the percentage of consumers beginning to repay student loans before the age of 25 has decreased from 30 percent to 15 percent.
The report also notes that about 23 percent of borrowers are not making payments large enough to reduce their student loan balances within 10 years of starting repayment, and more than 60 percent of those borrowers’ balances become delinquent. Many of them benefit from programs that allow them to stay current on their loans.
“[T]he share of borrowers not making payments large enough to reduce their balances has increased, particularly among borrowers with loans smaller than $20,000,” the report states. “Indeed, five years after starting repayment over 23 [percent] of these small-loan borrowers in recent cohorts are not making payments large enough to reduce their balances. While some of this trend likely reflects the growth of income-driven repayment plans, over half of this group is made up of borrowers who are delinquent or in default on their student loans.”
The bureau noted that the student loan market has seen rapid growth over the past decade. With approximately 44 million American borrowers owing money, the combined total of outstanding federal and private student loan debt exceeds $1.4 trillion. The majority of that debt is from federal loans.