New think-tank research shows more than 1 million student loan borrowers each year go into default and nearly 40 percent of borrowers are expected to default on their student loans by 2023.
Outstanding education debt in the U.S. has tripled over the last decade and now exceeds $1.5 trillion, posing a greater burden to Americans than auto or credit card debt, CNBC reported.
A new report from the Urban Institute, a progressive think tank in Washington, D.C., analyzed the fates of borrowers who entered repayment in 2012.
Federal loans come with a lot of protections that should make default rare, Kristin Blagg, a research associate at the Urban Institute, focusing on education, told CNBC.
However, those safeguards often fail. Within four years after leaving school, nearly a quarter of the borrowers had defaulted.
Defaulters are less likely than nondefaulters to have types of debt that require a risk assessment, like credit card, auto and mortgage debt. They’re more likely than nondefaulters to have their utility and medical bills fall into collections, as well.
People who default on their student loans are more likely to live in Hispanic and black neighborhoods, Blagg found.
The average defaulter resides in an area where the median income is around $50,000, compared with around $60,000 for nondefaulters.
Meanwhile, Newsmax Finance Insider Joe Resendiz recently offered some tips on how to lower your student loan payments.
“Outstanding student loan debt has reached a peak of $1.5 trillion. An even more alarming stat: Approximately 5 million borrowers nationwide are defaulting on their loans,” he wrote for Newsmax Finance.
“Student loan debt, and the growing struggle to repay it, has been a hot button issue in 2018. While some point to the rising cost of education as the problem, others cast blame on loan servicers—the companies responsible for handling the repayment process,” he said.
“According to a study by American Student Assistance, 46% of borrowers said monthly student loan repayment was difficult or very difficult. The overwhelming majority (60%) said their problems with the ability to repay stemmed from the ability to pay back the requested amount.”
To be sure, personal loans surged to a record this year and are the fastest-growing U.S. consumer-lending category, according to data from credit bureau TransUnion.
Outstanding balances rose about 18 percent in the first quarter to $120 billion, Bloomberg reported. Fintech companies originated 36 percent of total personal loans in 2017 compared with less than 1 percent in 2010, Chicago-based TransUnion said.
(Newsmax wire services contributed to this report).
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