July 2016 Report on "Benefits, Challenges, and the State of Student Debt"
Today, the Obama Administration released a report showing several significant challenges as a result of the growing student debt problem in our nation. In the report the Obama Administration provides a very detailed analysis of the student loan default numbers, the cost increases of tuition, and the impact of student loans on the economy. The conclusion that the Obama Administration makes is that while a lot of work and progress is being made (particularly in reducing default rates), there are significant challenges ahead that need further attention.
Below are some of the most interesting stats and accompanying charts from the report
The report covers default rates in significant detail. Defaults are defined as "borrowers who do not have their payments delayed through deferment or forbearance and who have failed to make adequate payments for nine months see their loans enter default". Figure 18 (below) shows how the volume and shares of default have changed since fiscal year 2009. Although the volume of debt in default continues to rise in parallel with the overall increase in student loan volume, the share of outstanding debt in default has steadied since 2012 (Figure 19).
The report goes on to say that while "examining defaults in the student loan portfolio, it is also important to consider that most loans that enter default remain that way in the portfolio for a significant period of time as there are limited mechanisms for loan discharge."
Homeownership and Student Loans
The rise of student loan debt may have an impact on the falling rates of homeownership for people in the 24-32 age group, as the rate fell from 42 percent in 2005 to 33 percent in 2014. The report has an interesting chart (Figure 37 below) that shows that people with student debt and people with very high student debt have reduced homeownership rates. For example, the chart shows that people with 50k+ debt have seen homeownership rates fall by almost half, from 11% in 2005 to 6% in 2004.
GradFin continues to be engaged in helping the student loan situation with its various options for borrowers. If we can help people pay down their debt faster, we can help them purchase homes, reduce delinquency rates, start saving for other life purchases.
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