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One-Fifth of Federal Direct Student Loans in Default; Equals Over $113 Billion

by Ken Anderson | Aug 08, 2013
Only about four in 10 borrowers with direct federal student loans are paying them back, according to a report that offers the first comprehensive snapshot of the program since the government created it in 2010.

Only about four in 10 borrowers with direct federal student loans are paying them back, according to a report that offers the first comprehensive snapshot of the program since the government created it in 2010.

Many of the 27.8 million borrowers with these newer direct federal loans aren't yet required to make payments: About 35 percent are still in school or within a six-month grace period after graduation, the report said.

However, about 18 percent are in programs designed to help distressed borrowers or have returned to school, and some 8 percent are in default, meaning the borrower hasn't made a payment in at least a year, according to the Consumer Financial Protection Bureau, the federal regulator that released the report.

The report indicates that a significant number of borrowers in the new program are unable to repay. Excluding borrowers who don't yet have to make payments because they are still in school or within the grace period, more than a fifth (about 22 percent) are in default or forbearance.

(Source: The Wall Street Journal, 6 August 2013)