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New Report Shows Student Debt is Inescapable, Regardless of the Size of the Loan

Data show that student loan defaults or delinquency are becoming the norm

Today, Demos, a New York based think-tank, released a new report that examines the repayment status of student loan borrowers, analyzing the nature of student loan defaults and delinquencies, and the role of student loan balances on an individual’s overall financial security. The report by Robert Hiltonsmith, Senior Policy Analyst at Demos, which is titled “Small Loans, Big Risks: Major Consequences for Student Debtors”, shows quantifiably for the first time that default is essentially unrelated to the amount borrowed. Additionally, factors including race and class can accurately project the likelihood of delinquency or default due to the lower average incomes of graduates of color combined with the need to take on higher levels of debt to finance their education.

Using data from Experian, one of the three major credit rating bureaus in the United States, the report found:

  • A large share of borrowers struggle to repay their loans.

    Nearly 40 percent of student loan borrowers in repayment are either in default or more than 90 days past due on their student loan payments.

  • Most borrowers in default owe small amounts.

    A third of borrowers in default owed less than $10,000 in 2014, and 56 percent owed less than $20,000.

  • Lower-income borrowers have higher default rates.

    Nearly 20 percent of borrowers earning less than $25,000 per year were in default, more than double the 9 percent default rate among borrowers earning more than $100,000 annually.

  • A degree is not a guarantee that a graduate will avoid default.

    Thirty percent of borrowers with bachelor’s degrees and 25 percent of borrowers with graduate degrees are either in default or seriously delinquent on their loans.

  • Borrowers of color face greater difficulty repaying their loans due to lower income levels.

    More than half of black borrowers and 44 percent of Latino borrowers in repayment are either in default or seriously delinquent on their loans.

“This report proves once and for all that there is no ‘safe’ amount of student debt, and that our current debt based system of funding higher education unfairly picks winners and losers based on race and economic class. Therefore it is imperative to ensure that our education system does not perpetuate a cycle of inequality by sticking students with debt that impacts their financial future in the long-term and hurts our economy. We need a comprehensive solution, that both provides relief for existing debtors and prevents the next generation of students from having to go into debt to obtain a college degree,” Robert Hiltonsmith, author of this report, explains.

To address the challenges highlighted in the report, Demos has recommended the Affordable College Compact, a federal-state compact policy that would ensure debt-free public college, in which the federal government provides matching grants to states that ensure the majority of their poor, working- and middle class-students can attend college without incurring debt or financial hardship.

Demos has a history of studying trends in affordable higher education. Over the last year Demos has published a number of reports on issues like how debt effects students of color, dispelling the top misconceptions around Debt-Free College and the importance of affordable higher education.


Contact: Charlie DiPasquale | 240.481.6632 | [email protected]