Student Loan Delinquencies on the Rise, Report Says

The latest report from the Federal Reserve Bank of New York indicates a quarter of all borrowers whose loans have come due are severely delinquent.students1

That tells us the percentage of Americans who have fallen further behind on student loan debts has spiked over the last 12 months, even though other measures indicate an economy that is steadily getting better.

As of June 30th, the number of outstanding student loan debts that were at least three months late stood at nearly 12 percent. That’s up from 10.9 percent one year earlier.

But, when we analyze total household debt distress, that figure has stayed above 4 percent since the economic crisis first hit Americans hard back in 2007. Now, it’s down to 3.98 percent, which is an indication things are getting better for most people.

Those with student loan debts, however, aren’t faring so well.

When we tally total outstanding student loans classified as severely delinquent or even just in default, it’s more than $135 billion. That’s actually more than other distressed non-mortgage debts added together. So that would include things like credit card bills, cell phone bills, auto loan payments, home equity credit lines and personal loans. This the first time delinquent student loan debts have exceeded this amount.

Total amount of outstanding student loan debts – both compliant and in default – is about $1.2 billion owed by about 43 million people. That’s significant. But what’s also deeply troubling is the fact that the average amount of debt each person is carrying as almost doubled in the last 10 years.

While those in the student loan industry still aren’t sounding any alarms, our Miami consumer debt defense attorneys recognize the fact that millions of borrowers are in distress when they don’t need to be. That’s because almost 90 percent of all the outstanding debt is either insured or owned by the U.S. government. What that means is that they are almost all allowed to apply for repayment plans that give them the option of setting their monthly payments based on their income. That kind of plan ensures they can actually afford to pay.

The fact that very few are taking advantage of this indicates a base-level issue with loan servicing departments. These are the companies in charge of managing and collecting monthly payments and setting student loan repayment options.

An official with the Consumer Financial Protection Bureau asserted these problems could stem from loan services simply trying to shuffle borrowers off the phone quickly, rather than giving them factual, workable solutions that are easily within reach and available. In fact, the CFPB ha said most of the former students currently in default likely could have avoided that kind of snowballing debt had they been offered a reasonable, affordable repayment plan.

Earlier this year, President Barack Obama instructed the CFPB to determine new ways to address student debt delinquency, which has risen quarterly since 2012.

If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.

Additional Resources:

Student Loan Delinquencies Jump as Crisis Spreads, Aug. 13, 2015, By Shahien Nasiripour, The Huffington Post

More Blog Entries:

Report: Housing Debt Saddles Older Americans, June 20, 2015, Miami Debt Defense Lawyers