This shocking statistic raises concern that the $200 billion owed might never get repaid. The new figures represent the after effects of a borrowing boom that has spanned over a decade, with a record number of students enrolling in trade schools, universities and graduate schools.
While most of these borrowers have now entered the workforce, 43% of the roughly 22 million Americans with federal student loans were not making payments as of January 1, according to the Education Department’s $1.2 trillion student-loan portfolio.
Approximately 1 in 6 borrowers, or 3.6 million, were in default on $56 billion in student debt, meaning they had not made a single payment in more than a year; Three million more were at least a month behind, owing roughly $66 billion. Another three million owing nearly $110 billion were in “forbearance” or “deferment,” meaning they had received permission to temporarily halt payments due to a financial emergency, such as unemployment.
Some borrowers are not even repaying their student loans when they can, according to research from Navient Corp. The study showed that borrowers prioritized other bills—such as car loans, mortgages and heating bills—over student loan debt. A borrower who defaults on an auto loan might have their car repossessed; with student loans, the penalty is not as immediate or severe.
Advocacy groups, some members of Congress and the federal Consumer Financial Protection Bureau blame the loan servicers for not doing enough to reach out to struggling borrowers to offer manageable payment options.
The Obama administration has stepped up efforts to reach borrowers and offer the income-based repayment plans. In certain cases, the government is garnishing wages and tax refunds of borrowers who refuse to pay. Private debt-collection agencies hired by the Dept. of Education garnished $176 million in Americans’ wages in the final three months of last year for student debt, according to federal data.
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For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
