The Looming Student Loan Default Crisis Is Worse Than We Thought

from Brookings

This report analyzes new data on student debt and repayment, released by the U.S. Department of Education in October 2017. Previously available data have been limited to borrowers only, follow students for a relatively short period (3-5 years) after entering repayment, and had only limited information on student characteristics and experiences. The new data allow for the most comprehensive assessment to date of student debt and default from the moment students first enter college, to when they are repaying loans up to 20 years later, for two cohorts of first-time entrants (in 1995-96 and 2003-04). This report provides a broader perspective on student debt and default that considers all college entrants rather than just borrowers, provides substantially longer follow-up, and enables a more detailed analysis of trends over time and heterogeneity across subgroups than previously possible.

Key findings from new analysis of these data include:

More here.

Posted in Careers, Education and tagged , .


  1. Student loan defaulting is undoubtedly a common occurrence these days, as well as in the past 20 years. I have experienced firsthand how student loans can adversely affect my and many other peoples’ lives. The analysis for the new student loan trends are troubling, but unsurprising to say the least. I was particularly troubled when I read that nearly 40 percent of college students may default on their student loans by 2023. Given these alarming trends, it seems apparent that a solution should be presented in order to make it easier for all students to afford college.

    Indeed, when it is much too easy for somebody to default on their student loans, the rates of student loans are bound to increase exponentially in short periods of time. In fact,

    “You are responsible for repaying your student loans even if you do not graduate, have trouble finding a job after graduation, or just didn’t like your school. If you do not make any payments on your federal student loans for 270-360 days and do not make special arrangements with your lender to get a deferment or forbearance, your loans will be in default.” (FinAid Paragraph 2)

    If the conditions of repaying student loans remain as strict as they are now, college will become an institution that can only be afforded by the rich. In my opinion, higher education should be afforded by any person willing to put in the hard work to reach self-actualization. There are $1.4 trillion in loans outstanding, and that is certainly a clear sign that there needs to be tremendous change in the cost of college.

  2. In today’s world, student loans are one of the largest causes of debt and is increasing semester by semester. Education is one of the most important aspects that people should receive in order to accomplish their goals and one of those ways of having an education is to apply for student loans if deciding to attend a four-year university. Something that I realized from this was that it can take up to twenty years to repay your student loans and could even take some people to finish paying off their student loans by the time they become a senior citizen. For students that take out student loans but are unable to graduate from the university, they still have to pay back whatever they took out and possibly struggle if they can’t find a job in a matter of time. Even if someone decides to start their own business, they have to be capable of having a positive profit or else they will become bankrupt and also have to pay off any student debt that they still have from school. I believe that there should be a system to handle student loans in an uncomplicated way that would cause more students to feel comfortable taking out a student loan and paying it off by ten years the most. Students today take out student loans and become frightened when they still are paying off student debt by the age of 50 or realize that they won’t be able to buy a house or car until majority of the debt is payed off.

    One of the solutions for this issue is that students attend community college for two years for an Associate’s degree and then transfer to a university for the Bachelor’s degree. For example, I decided to attend Middlesex County College first before attending a four-year university because I heard a variety of scary stories of people paying off student loans when they’re still in their 50s and I’ll rather be debt free for my first two years of college than attend a four-year university for my first year and already be in student debt. Also, students who attend community college first take similar core classes that students at a university would take and the only difference for this is that community college students save more money than those who take core classes at a university. From what I seen, students would attend a university for a year and then transfer to a community college because they either can’t afford the tuition or struggle with a major that doesn’t fit their future. I believe that students who attend community college first made the right choice because majority of them will be debt free for their first two years of college and have the chance to earn scholarships from a university if they succeed in their classes at the community college. At first, I was going to attend a four-year university but when I saw the tuition for the university, my parents weren’t pleased with the price and recommended me to attend community college so that I would be prepared to handle attending a university. According to studies, students who attend community college first are most likely to finish paying off their student loans faster than those who attend a university and have a better chance of receiving an internship either before or right after receiving their Bachelor’s degree.

    Finally, I agree that this student loan crisis is worse than we expected because the current level of student debt is at a prominent level and could possibly cause some students to delay on buying a house or car until majority of their debt is payed off. From my point of view, I believe that college tuitions should decrease because students that attend the university with a variety of debt could struggle to find a job right after receiving their Bachelor’s degree and would be paying off their debt until around their 40s or 50s. All students are responsible of paying back their student loans regardless if they leave the university or not and some students struggle to pay it all back in time if they don’t have the job that they expected to have for their future. Universities should create a student loans plan for those that can’t pay off most of their debt by a certain time to allow them to find a job that would pay back their student loan sooner than later. If colleges see a reduced attendance of students at their institution, then they would decrease their tuition to allow students to attend their university with a comfortable tuition amount per year. Students need to realize how far they need to go education wise in order to receive the job of their future such as for example, majority of students interested in the criminal justice field just need to receive an Associate’s degree and they will earn a job they expected. Overall, I believe that colleges should reduce their tuition or offer more scholarships for students to attend their university and create a way for students to have more time paying off their student loans to allow them to finish college on a positive note and cause them to not pay off student debt until they’re around fifty years old.

  3. In the article it is stated that student-debt is the second largest household debt in the United States at just about 1.4 trillion dollars in loans and that it is continuing to rise because of more and more people enrolling into higher education. In my opinion it is bad that student debt is one of the highest household debts because getting a higher education is promoted all over the country. If students can’t get a high paying job without getting a higher education then there should not be this much of an issue.
    Being a college student I know how expensive college can get between tuition, room and board and then textbooks. There has to be another way to lower the cost of everything in order for students to be able to afford to attend colleges and universities. I know that from experience private colleges and universities give out a lot of academic money and financial aid to a point where it can be cheaper to attend rather than going to a state school. Which is okay, but what about state schools tuition?
    I am a New York resident and I am aware that the State University of New York recently just set a new action for free tuition. If a household income is under a certain amount of money (I believe it is $100,00 but I am not sure), than that particular student can go to the SUNY school free of charge. However, most people like my family do not meet the required household income to send their children there for free. It is great that there is another opportunity for people to attend college for free but on the other hand is it really fair?
    College is most defiantly not for everyone. However, I believe that the government should try to help lower the cost for students who really cannot afford to pay tuition. Financial aid is great and all but most students only end up with loans that they have to pay back. This is why there is a 1.4 trillion dollar debt for student loans. Something needs to be done about it sooner rather than later because the cost of tuition is only going to increase as time moves forward.

  4. Student debt has become a common factor in today’s society just to get an education. Its no surprise that the student loan debt is the one of the largest household debts in America. Americans owed a total of $1.31 trillion in student-loan debt. This translates to an average of $10,397 in student-loan debt per household. We come to view Student loans as an investment into ourselves. I believe this outlook on student loans has gotten society use to students taking out these loans as a common custom to college.
    I find this process to be exploiting students trying to obtain an education. Education is one the most important factors that help advance a country. It has been proven a country’s standard of living improves when they primarily focus on education. Education is a beneficial process that should not haunt student for the rest of their lives. The article mentions that student loans cannot be absolve through bankruptcy. Someone can become bankrupt due to their financial situation but they are still liable for paying off their student loans. These loans are broken and are exploiting students for advancing their future.
    The best solution to stop the student loans is to make college free or more affordable. This idea is not as radical as most people think. In fact, it’s what many of our colleges and universities used to do. The University of California system offered free tuition at its schools until the 1980s. There was one plan proposed by a politician would have made tuition free for public colleges and universities. Even though it seems like a foreign idea universities did not cost Americans thousands of dollars in loan to get an education. In 1965, average tuition at a four-year public university was just $243 and many of the best colleges did not charge at all.
    College has become more of an expensive luxury more of an opportunity for to advance a student’s future. Students have learned to focus on education to get a better future so when putting a price on an education it’s hard to value. I think in talks of student loan debt, we should be having the discussion on whether or not education is a consumer product, or a public good. The cost of tuition only continues to rise and college education is becoming hard to afford. Soon college would only be accessible to the middle class people and wealthier.

  5. The report by Judith Clayton emphasizes the need to re-examine the light shed on student loan debt in a different manner, focusing less on total loan amounts and concentrating instead on the institutions and the demographics of those attending the different institutions. Ms. Clayton acknowledges that although current estimates will predict that the second cohort from 2003-2004 will have higher default rates compared to the 1995-1996, that the Great Recession is a confounding variable. The Great Recession had caused unemployment rates not seen since the Great Depression.
    The report sheds significant information about the for profit educations institutions. Indeed there has been an unraveling of high profile for profit institutions such as Corinthian College. The US Department of Education has laid out a plan for Corinthian students to have their loans forgiven as it has discovered evidence of fraud in over 100 of their campuses (
    Ms. Clayton demonstrates that perhaps the numbers that are being generated for calculating debt and default rates may arguably be considered data and not information, data being the term for raw input collected into a system and information being the useful output that stakeholders can use to make decisions. For example Ms. Clayton describes in another related study that there is an inverse relationship between the amount of debt and default rates wherein those with higher amounts of debt are defaulting less than those with lower amounts of debt. This is attributed to higher degrees of attainment. ( Ms. Clayton attempts to account for some of the differences in student loan default rates amongst the different demographics noting that among those that default, different avenues for remedy are sought. For example blacks are more likely to consolidate debt whereas whites are more likely to rehabilitate defaulted debt. The studies however indeed warrant an examination of methods to better improve education related debt outcomes.

  6. Student loan debt is becoming a bigger issue than ever before. With college becoming almost a necessity to not hold a minimum wage job for the rest of one’s life, more and more graduates are opting to go to college than going straight into the workforce. This is not necessarily a bad thing because more students are valuing their education more. However, the price of attending college is discouraging some students from even trade school or community college which is a problem A chart on the article, “The Next Model of Student Loans” displaying the average student loan debt vs. inflation from 2003-2017 is alarming. It has already doubled and is close to tripling before 2023 which will be a period of only 20 years. The rate of inflation is also steadily increasing at an alarming rate so it does not seem that student loan debt is going to decrease anytime soon. Something needs to be done to lower the cost of attending colleges. Whether it involves state schools offering better scholarships to in-state students applying, or FAFSA improving their grants. I feel like especially with FAFSA, which only tracks your parent’s income is unfair to those students who plan to pay for their tuition by student loans. As it is, FAFSA does not give nearly enough money to cover the entire cost of attending college. Between food, books, tuition, and room and board, the costs quickly add up and almost every student in the country applies, and very little is given enough to cover the overall cost. I know that student debt can follow people in their later years in life, which is sad because once you get to a certain age you want to start thinking about your future, having a family, getting married, and by the time college students in this era start thinking about that, they will still be in student loan debt and trying to find a way to make paying for college for their kids easier. Aspects within the article such as declining fertility rates are something that had never crossed my mind when thinking about the topic of student loans. However, it makes perfect sense. How are young adults supposed to start a family when they are $40,000-$80,000 in debt depending on if one or both partners went to college.

  7. The student loan system is an American-made invention that needs to be improved, and has the potential to. I am saying this as a biased student who will suffer the unfortunate fate of student loan debt, however, it is something that with the right efforts truly can be made better for the next generations and the country overall. Currently, student loans are rising at an alarming unprecedented rate, one that can not even be supported by the inflation rate. Although both the inflation rate and the average debt students will accumulate after college are increasing they are at entirely different speeds. If the two had been proportional the rapid increase in the price for college would make sense because college students would essentially be getting the same value for their money it would just cost more, but this is not the case. Purdue University is setting up a very logical model system that other universities to seek to follow. Students will pay based on the amount of money they make upon graduation. This is a worthwhile idea because those who do make more money can afford to pay more money and the school is still getting the money they deserve. In the other case, those who leave college making little to no money will not dip even further financially because they will not be required to pay as much. In addition, if the school spends more funds on a given student’s major they will likely have to pay more, which is a very rational solution if they are using, for example, expensive equipment and being provided costly opportunities, they will pay for the aid they received. While those who potentially did not reap as much benefits from university-funded resources will not have to pay extra fees. I understand why colleges may not want to adapt these new ideas because in the short-run it may seem like they are losing money, however, I believe when universities implement this system it will make their school more appealing to applicants. This program will likely make the school more pristine if top applicants are drawn to it for these fair and rare financially aid opportunities. In the long run this will reflect favorably on the university improving overall ratings and the quality of school alumni. Overall, a bold choice on behalf of Purdue University should be one considered by other schools around the country and maybe would seem like less of such an unheard of move by Purdue and something normal and beneficially.

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