Student loan delinquencies have been a major problem for the United States’ economy for a good while now. Rising costs in tuition and lack of proper opportunities created problems in which students couldn’t pay back their debt.
“Have,” however, is the key word.
Recent reports have shown that after a long struggle, delinquency is on the decline. As it stands, the Department of Education reported 1 in 5 students who graduated or left college are currently one month overdue on his or her payments, bringing the total figure to roughly 19%. According to the Department of Education, this has been the figure since the December 31st of 2015.
This figure, however, does not include loans from private lenders; only government issued ones. That being said, the delinquency rate dropped from 22% last year, a positive trend which will hopefully continue. This is because, despite being in decline, the level of late payments and those in default is still extremely high, a likely result of the 2009 housing crash and resulting economic fallout. The resulting drop in percentage though is another solid sign the economy is providing enough stable work for those in need.
It’s not all job related though. As the years have gone on, many revisions and additions have been made to how students can repay loans. An extremely popular one, which has seen enormous use is the income-based repayment plan. Under this plan, students pay a fixed percentage from their monthly earned income, typically around 10-15%. This has great benefits, as if a student’s income fluctuates often they won’t be stuck with a flat amount. As of now, about 4.6 million students use the service to repay.
Overall, analysts have found it to be constructive, but still harmful to the U.S. economy. In other cases, many students are not making payments on their loans at all, having to use forbearance or deferment programs. With these they don’t pay monthly bills, though interest accrues each month, resulting in higher repayment costs.
It’s good to see students are finally able to make positive dividends in terms of repaying loans, as the issue continues to be a major economic drain for the United States. The solutions are not quite perfect, as each system puts cost somewhere else (such as taxes for US citizens) or doesn’t adjust for interest, though allows some breathing room for many carrying immense loan debt.