Student Loan Defaults Increase For First Time In Five Years

Student Loan Defaults Increase For First Time In Five Years

Here at Tematica, we’ve been closely monitoring consumer debt levels and default rates to assess the impact on disposable income and consumer spending levels. Some of the data is published on a lag basis, and that’s the case with education loan default data published by the Department of Education. The latest report showed a pickup in the default rate in 2014, but we suspect that figure has continued to move higher since then due to weak wage growth, the pickup in part-time jobs vs. full-time ones and rising consumer debt levels. Those who are in default will likely embrace our Cash-Strapped Consumer theme as they look to stretch their disposable income while trying to maintain student debt repayments.

For the first time in half a decade, the rate of education loan defaults among recent college students has risen, highlighting the struggle many recent graduates face when it comes to paying their educational debts.A new report from the Department of Education found there was a slight increase in the percentage of borrowers who are defaulting on their student loans within three years of entering repayment. This is known as the cohort default rate.

According to the report, among the more than five million borrowers who entered repayment in 2014, 11.5% (or 580,671) defaulted on their loans.The new figure is up slightly from the 11.3% (or 593,182) of students who entered repayment in 2013 and subsequently defaulted in 2015.This uptick in the default rate comes after several years of decreases. Three years ago, recent grads were defaulting at a rate of 11.8%, down from a rate of 13.7% in 2013.

Source: Student Loan Defaults Increase For First Time In Five Years; 8.5M Borrowers Now In Default – Consumerist