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CFPB Finds Borrowers with $20K in Student Debt Doubled over Last Decade
Thursday, August 17, 2017 6:40 AM

Record Student Debt Spurring Employers to Offer Student Loan Repayment Benefits 

Yesterday, the Consumer Financial Protection Bureau released a new data point finding that nearly half of student loan borrowers leave school owing at least $20,000, double the share of borrowers a decade ago. The Bureau also found that more borrowers are taking out student loans later in life, and fewer borrowers are paying down their student debt in five years.

Record student debt and associated borrower stress is spurring more employers to offer student loan repayment benefits to their employees, according to a separate CFPB report released, which features recommendations to help employers and other companies that manage benefits programs ensure that borrowers receive the maximum value.

The student loan market has grown rapidly in the last decade, with about 44 million Americans currently owing money. The combined total of outstanding federal and private student loan debt now exceeds $1.4 trillion, the vast majority of which are federal loans. Student loans are usually “serviced” by third parties. These servicers are a critical link between borrowers and lenders. They manage borrowers’ accounts, process monthly payments, and communicate directly with borrowers.

Borrowers Taking on More Debt
Based on an analysis of over one million anonymized student loan borrowers’ credit reports, the Bureau looked at groups of borrowers who began repaying loans from 2002 to 2014. The Bureau analyzed each group’s repayment experience through 2016. Through this analysis, the Bureau identified key changes in the way consumers borrow and repay student debt. Specifically, the Bureau found:

  • More than 40 percent of student loan borrowers leave school owing $20,000 or more: The study finds that the percentage of borrowers owing $20,000 or more at the start of repayment has more than doubled since 2002, from 20 percent to more than 40 percent. The percentage of borrowers owing $50,000 or more has seen even more rapid growth, tripling over this same period from 5 percent to 16 percent.
  • Half of student loan borrowers are older than 34 when they start repayment: Since 2003, the percentage of borrowers starting repayment over the age of 34 has doubled, increasing from 25 percent to nearly 50 percent. The study also found the percentage of consumers beginning repayment under the age of 25 has decreased from 30 percent to 15 percent.
  • 30 percent of borrowers are not paying down their loan balances after five years in repayment: The percentage of borrowers who are not paying down their loan balances has nearly doubled, increasing from 16 percent in 2008 to 30 percent in 2016. This means that even if borrowers are making payments, those payments are not enough to cover the interest on their loans. Therefore, the amount of principal is the same and the overall amount of debt is the same or more, depending on how much interest has accrued. The percentage of borrowers whose debt has grown while in repayment has increased from 8 percent in 2008 to 12 percent in 2016. The share of borrowers who have fully repaid their loans five years into repayment has fallen nearly 20 percent over the last ten years from 50 percent to 41 percent
  • More than 60 percent of borrowers not reducing their balances are delinquent: Income-driven repayment plans can allow borrowers to make small or zero-dollar payments and still remain current on their loans. These affordable payments may not decrease their loan balance but can help them avoid delinquency. Despite increases in the availability of these plans, 60 percent of borrowers who are not paying down their balances five years into repayment are delinquent on their loans. Among these borrowers, those with less than $20,000 in student loans are even more likely to be in poor standing, with 75 percent delinquent on at least one of their loans. More information on this key finding can be found in the Bureau’s explainer blog.

Report: “CFPB Data Point: Student Loan Repayment."

Report: “Innovation Highlights: Emerging Student Loan Repayment Assistance Programs.”

Find out more at the CFPB Newsroom.