Much of Student Loan Debt is Not Being Paid Back, According to a Recent Report

The percentage of unpaid debts in the U.S. isn’t nearly as dismal as it was a few years ago—or even last year—except for one type of debt: student loans.  While the percentages of total consumer debt fell this year, as well as delinquency rates for that debt, student loan debt has been steadily growing for the past 8 years, with delinquency rates on the rise, as well.  In whatever way you look at it, the outlook isn’t a positive one.

From a report released in September, outstanding student loan debt now totals $956 billion and is still rising.  Approximately half of that amount is new student loan debt that is being taken on, while the other half is defaulted loans that are now showing up on credit reports across the country, affecting the credit of thousands of Americans.  It is now calculated that some 11% of student loans are now 90 days delinquent, which is considered “serious delinquency” by most credit standards.  In addition, many student loans are in deferment based on the debtor’s circumstances or continued enrollment in school, so these rates could be even higher once deferment periods end.  Since deferment is a limited prospect, it remains to be seen what will happen when it ends for the hundreds of thousands who have taken out more in student loan debt than they can afford to pay back. 

Since student loan debt is one of the few types of debt that cannot be discharged in bankruptcy, it remains to be seen what effect student loans will have on the economy if the default rate continues to rise.  Meanwhile, collections agencies and collections attorneys are watching closely to see just what role they will be playing in the process and whether student loan debt will be the next big debt bubble to hit our nation.