Posted on May 11, 2015

We have all been hearing in the news over this past year that student loan debt has been growing nationally at an alarming rate. It has even surpassed credit card debt and stands at over $1 trillion. It has even been predicted to be the next big “bubble.” But the situation may be worse than we thought.

How Could It Be Worse?

An article in The Wall Street Journal states that 31.5% of student loan borrowers now in repayment are at least one month behind, based on research done by the Federal Reserve Bank in St. Louis. This rate is much higher than that stated by the U.S. Department of Education and the Federal Reserve Bank of New York.

The reason for this is that the official figures measure delinquency rates as a percentage of all those with student loan debt (including those still in school or in a deferment or forbearance), not just those in repayment. This calculation led to a much lower rate of 17%.

The study showed that 55% of all student loan debt was held by people in repayment. Thus by cutting the official data pool almost in half, the “official” delinquency rate almost doubled!

How Does This Compare to Other Debt?

How does this delinquency rate compare? The Federal Reserve Bank of Kansas City reports that only 8.5% of all auto loans were at least 30 days delinquent!

These statistics should also be tempered by a couple other facts. First of all, the delinquency rate appears to have stabilized, neither going up nor down. Second, for federal student loans, this is the rate of “delinquency,” not default, as a borrower has to be 270 days behind (not 30) to be in default. Also, for those in New Jersey holding CLASS loans, default for those making monthly payments is after 180 days.

The really good news for those with federal loans is that they can most likely avoid default by getting into an affordable income based plan, like IBR or ICR, before going into default. There is still time!

What Should I Do?

If you live in the Gloucester County, New Jersey, area, are struggling with payment on federal student loan debt, and are ready to take action and do something about it, I may be able to be of assistance. Just call me at 856-432-4113 to schedule an appointment to come in.

If you would like more information about student loans, you can download my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.