Defaulting on a loan happens when repayments are not made for a certain period of time as defined in the loan's terms of agreement, typically a
promissory note. For federal student loans, default requires non-payment for a period of 270 days. For private student loans, default generally occurs after 120 days of non-payment.
In 2021, outstanding student loan debt has reached a record more than $1.8 trillion. Outstanding student loan debt has increased from $1.06T to 1.41T from 2014 to 2019, a 33% increase. The average loan balance per borrower has reached over $35,000. Of that amount, 10.8% of that student debt is at least 90 days past due or in default. This is not limited to a small population; analysis has shown that every year at least 1 million individual borrowers enter default on their student loans. Many analysts consider the number of individual borrowers that are at risk of default to be undercounted due to the prevalence of borrowers in deferment, forbearance, grace periods.
Defaulter demographics
According to analysis of borrowers from the 2003-2004 academic year over a twelve-year period, defaulters generally tend to be older, lower income, and more financially independent than those who did not default. Borrowers typically owe $9,625, which is $8,500 less than the median loan balance of a non-defaulter. The majority of defaulters did not complete their bachelor's degree, but the median completed at least one year of study while maintaining grades in the C+/B- range. This shows that defaulters are able to complete college level work. Furthermore, most borrowers do not immediately enter default - the median borrower takes 33 months to enter default on their federal loans. Generally, a little more than half of all defaulters are able to rehabilitate their debt.
Debt rehabilitation
Slightly more than one half of borrowers that enter default rehabilitate their loans
There are a number of paths to resolving student debt default, including:
* Completing 10 months of agreed upon payments
* Repayment via debt consolidation or other types of loans
* Discharge via total and permanent disability
* Discharge via bankruptcy
See also
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Bankruptcy Abuse Prevention and Consumer Protection Act
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) () is a legislative act that made several significant changes to the United States Bankruptcy Code.
Referred to colloquially as the "New Bankruptcy Law", the Act of Co ...
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Cohort Default Rate
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Default (finance)
In finance, default is failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. A nati ...
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Garnishment
Garnishment is a legal process for collecting a monetary judgment on behalf of a plaintiff from a defendant. Garnishment allows the plaintiff (the "garnishor") to take the money or property of the debtor from the person or institution that holds t ...
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Higher Education Act of 1965
The Higher Education Act of 1965 (HEA) () was legislation signed into Law of the United States, United States law on November 8, 1965, as part of President Lyndon Johnson's Great Society domestic agenda. Johnson chose Texas State University (t ...
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Loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that d ...
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Student loans in the United States
Student loans in the United States are a form of financial aid intended to help students access higher education. In 2018, 70 percent of higher education graduates had used loans to cover some or all of their expenses. With notable exceptio ...
References
{{DEFAULTSORT:Student Loan Default
Student loans in the United States