Student loan debt continues to be a growing problem facing many Americans, young and old, according to data released by the Consumer Financial Protection Bureau earlier today.
The number of individuals with at least $20,000 in student loan debt has doubled during the past decade, to about 40% of all student loan borrowers, according to the data.
As well, the number of individuals with student loans who are over the age of 35 has doubled during the past 15 years.
Most importantly, for the ARM industry, the number of borrowers not making payments high enough to reduce their loan balances has increased, especially among those with balances under $20,000. Half of the group of borrowers in this category are delinquent or in default on their student loans, according to the CFPB.
However, growing student loan amounts mean many borrowers will be affected by student loan debt much longer than in prior cohorts. This points to a greater need to understand how large loan balances affect consumers’ use of other credit products. While the majority of borrowers may continue paying down their balances or remaining in good standing on their loans, the cost of doing so may be changing and constraining consumers’ other financial decisions.
The rate of borrowers who started repaying their loans in 2014 and have fully paid off their loans is the lowest of six different groups of individuals dating back 15 years. By year five, just over 40% of all individuals in the 2014 category have fully repaid their loans, compared with nearly 50% of those who started their repayments in 2002.
Individuals with at least $50,000 of student loan debt make up more than 10% of the 2014 category, compared with less than 5% of those in 2002.
“…consumers with small loan amounts have become less likely to actively pay down their loans in recent cohorts and, for some cohorts, more likely to go delinquent. This increase in borrowers with small loan amounts who are in poor standing is striking given the growth in the usage of alternative repayment plans in the last several years.”
