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Here’s How Many People Default on Their Student Loans in the U.S.

27 points by thomasyoung99 5y ago

dsizzle 5y ago
I'm surprised private schools have a lower default rate, since they cost more. I suppose people who attend private school come from wealthier families on average? For reference, those numbers are all higher than the typical mortgage default rate: https://www.statista.com/statistics/205959/us-mortage-delinquency-rates-since-1990/ https://www.statista.com/statistics/205959/us-mortage-delinq...
- tshaddox 5y ago
  There are probably plenty of reasons why wealthier families attend prestigious private schools even if tuition were free, perhaps the most conspicuous being the high profile bribery scandals.
- JJMcJ 5y ago
  Private non-profit - Harvard Medical School - very low under 1% default Private for-profit - Joe's No Good Truck Driving School - maybe 25% or even 50% default With a spectrum in between depending on quality of school and area of study.
  - dragontamer 5y ago
    The big for profit schools sound like a big name but aren't. Like University of Phoenix. The sad fact is: the typical American doesn't even do enough research to know if they are going to a private for profit school or a prestigious state school. They are just happy they 'got into college', nonethewiser that the school they got into is a money trap.
- jeffbee 5y ago
  That is not what the data says. The data says that public universities have the lowest. But public and non-profit private are very similar, so the real split is probably between private for-profit (i.e. scams) and everyone else. https://infogram.com/student-loan-default-rate-by-school-type-1h7v4pryy9kq2k0 https://infogram.com/student-loan-default-rate-by-school-typ...
cipher_system 5y ago
A lot of people have trouble paying their student loans and many seem to call for cancellation of all student debts. The interest rates on US student loans are from around 5% according to https://www.valuepenguin.com/student-loans/student-loan-interest-rates https://www.valuepenguin.com/student-loans/student-loan-inte... At the same time the US government can borrow at around 1%. Why not consider education an investment in society and let students borrow at this rate as well? My swedish student loan has 0.05% interest rate this year. I don't get it.
- Rebelgecko 5y ago
  Theres a strong correlation between the cost of a house and mortgage interest rates (which makes sense- most people set their budget based on a monthly payment, not on an overall purchase price). I wouldn't be surprised if there was a similar correlation for tuition costs (which have blown up over the last few decades)
  - entangledqubit 5y ago
    From what I understand, in the US it's much easier to walk away from a mortgage (with an underlying asset to reclaim) than student loans. I'm under the impression that this (and government default guarantees) makes lenders more willing to lend money. I'm curious if tuition would have risen as much if lenders were less willing to lend money due to structural changes (e.g. actually being able to lose money).
- lordnacho 5y ago
  The government is a very different credit risk to a student. More likely to default -> higher interest rate. Having said that I do think they've got something wrong over there.
  - JJMcJ 5y ago
    Private student loans often have very high rates, like credit cards. Very easy to end up paying $200,000 to retire a $50K debt.
shrx 5y ago
Clickbait title, never gonna visit the site.
- genewitch 5y ago
  It's a page full of charts made from government data. It doesn't have any ads at all.
malwarebytess 5y ago
Do these default statistics include perma-forbearance? The link in the page was dead.
shmerl 5y ago
The whole system of putting students in debt to get education seems horribly messed up.
- b9a2cab5 5y ago
  It aligns incentives between society and the student. If the student fucks around or majors in something useless, they're on the hook for it. I'd gladly subsidize more STEM degrees with my taxpayer dollars but I won't give a single dollar towards underwater basket weaving type degrees. Every single humanities class I took in college was utterly useless. Advocates claim you're learning how to read and write competently but I learned that from business school, not sociology and history.
  - shmerl 5y ago
    Student are in debt either way. So I don't see how it aligns anything except for those who profit on it.
    - b9a2cab5 5y ago
      Because for some students the debt is paid off quickly, so in the long run the lower taxes from the state not paying for everyone's education make that student better off. For other students with useless degrees, the consequences of their actions come home to roost with their debt. That being said I do think student debt should be dischargeable in bankruptcy. As is the market for education is dysfunctional.
      - shmerl 5y ago
        Define "useful" here. Lot's of people with useful education struggle with paying off their debt. There is something pretty crooked in such attitude.
        b9a2cab5 5y ago
        Objectively, from the statistics, that's just not the case. Average undergraduate student loan debt in public California schools was $23,600 in 2019 [1]. That is less than the price of most new cars. [1]: https://www.sacbee.com/news/politics-government/capitol-alert/article233713687.html https://www.sacbee.com/news/politics-government/capitol-aler...
VWWHFSfQ 5y ago
This is interesting data but I'm having trouble understanding it. For instance, several years ago there was a blog posted on here about a lady that took a $250,000 loan to go to Duke University to get a Theater Management degree. She then discovered that she was, in fact, never going to be able to pay back that money, so she wrote this blog post about how awful and predatory the USA higher education system is, and that she was now running off to Russia with her (Russian) husband so that she could escape the crippling debt. Now, there are certainly problems with the cost of higher education in USA, but that's not an example of it. Her problem was entirely different and pretty much of her own making, as far as I'm concerned. Nobody is going bankrupt trying to go to Central Detroit Community College. Or even most in-state universities. So I'm trying to understand these numbers.
- jrochkind1 5y ago
  What don't you understand about those numbers?
- Retric 5y ago
  News stories are always looking for the extreme examples, someone with 10k in student debt and a stage 4 cancer is also never paying back their loans. However, Delinquency in the article just means they missed one or more payments. That’s really easy to do even for people who eventually pay back their loans.
  - dan-robertson 5y ago
    Default in the article is defined a few different ways (and they also talk about delinquency and loans in forebearance) but roughly corresponds to a year or so of missed payments.
    - Retric 5y ago
      Default should generally be 270 days.
- mensetmanusman 5y ago
fn-mote 5y ago
This page is very frustrating to read. There is no way that it has enough information to make any informed conclusion. I feal like a real analysis needs to drill deeper into the data. Why are students not repaying their loans? After a student is "in default" on a loan (no payments for a year), do they ever pay it off? Being in default isn't like bankruptcy; the debt is still there and there may be reasons later to pay it off. I know at least some institutions that will not release transcripts while they are owed money; I don't know if there are any incentives to keep paying student loans. The risks of default broken down by course of study is there, very roughly, but would more detail reveal the issues more clearly? I'm sure that economists and think tanks have studied this problem. Maybe someone can post a link to some good article or survey on the topic.
dan-robertson 5y ago
The system in the U.K. is income-based repayment with automatic forgiveness after 30 years and an interest rate linked to inflation and income (your interest rate is up to 300bp higher if your income is higher). In some sense this is good because it avoids defaults or unmanageable repayments, but it can be a bit unegalitarian in how different people are affected: those with low incomes are ok but they have low incomes, those with particularly high incomes get to pay the loans off quickly and so don’t have much interest whereas those who follow a more common or somewhat good career progression will end up paying the loan off slowly with a lot of extra income. Furthermore, those people who had more family support would have lower principals and so would pay off less. So it comes out a bit like a graduate tax but borne most by people with middle incomes.

27 points by thomasyoung99 5y ago

I'm surprised private schools have a lower default rate, since they cost more. I suppose people who attend private school come from wealthier families on average? For reference, those numbers are all higher than the typical mortgage default rate: https://www.statista.com/statistics/205959/us-mortage-delinquency-rates-since-1990/ https://www.statista.com/statistics/205959/us-mortage-delinq...

tshaddox 5y ago
There are probably plenty of reasons why wealthier families attend prestigious private schools even if tuition were free, perhaps the most conspicuous being the high profile bribery scandals.
JJMcJ 5y ago
Private non-profit - Harvard Medical School - very low under 1% default Private for-profit - Joe's No Good Truck Driving School - maybe 25% or even 50% default With a spectrum in between depending on quality of school and area of study.
- dragontamer 5y ago
  The big for profit schools sound like a big name but aren't. Like University of Phoenix. The sad fact is: the typical American doesn't even do enough research to know if they are going to a private for profit school or a prestigious state school. They are just happy they 'got into college', nonethewiser that the school they got into is a money trap.
jeffbee 5y ago
That is not what the data says. The data says that public universities have the lowest. But public and non-profit private are very similar, so the real split is probably between private for-profit (i.e. scams) and everyone else. https://infogram.com/student-loan-default-rate-by-school-type-1h7v4pryy9kq2k0 https://infogram.com/student-loan-default-rate-by-school-typ...

cipher_system 5y ago

A lot of people have trouble paying their student loans and many seem to call for cancellation of all student debts. The interest rates on US student loans are from around 5% according to https://www.valuepenguin.com/student-loans/student-loan-interest-rates https://www.valuepenguin.com/student-loans/student-loan-inte... At the same time the US government can borrow at around 1%. Why not consider education an investment in society and let students borrow at this rate as well? My swedish student loan has 0.05% interest rate this year. I don't get it.

Rebelgecko 5y ago
Theres a strong correlation between the cost of a house and mortgage interest rates (which makes sense- most people set their budget based on a monthly payment, not on an overall purchase price). I wouldn't be surprised if there was a similar correlation for tuition costs (which have blown up over the last few decades)
- entangledqubit 5y ago
  From what I understand, in the US it's much easier to walk away from a mortgage (with an underlying asset to reclaim) than student loans. I'm under the impression that this (and government default guarantees) makes lenders more willing to lend money. I'm curious if tuition would have risen as much if lenders were less willing to lend money due to structural changes (e.g. actually being able to lose money).
lordnacho 5y ago
The government is a very different credit risk to a student. More likely to default -> higher interest rate. Having said that I do think they've got something wrong over there.
- JJMcJ 5y ago
  Private student loans often have very high rates, like credit cards. Very easy to end up paying $200,000 to retire a $50K debt.

shrx 5y ago

Clickbait title, never gonna visit the site.

genewitch 5y ago
It's a page full of charts made from government data. It doesn't have any ads at all.

malwarebytess 5y ago

Do these default statistics include perma-forbearance? The link in the page was dead.

shmerl 5y ago

The whole system of putting students in debt to get education seems horribly messed up.

b9a2cab5 5y ago
It aligns incentives between society and the student. If the student fucks around or majors in something useless, they're on the hook for it. I'd gladly subsidize more STEM degrees with my taxpayer dollars but I won't give a single dollar towards underwater basket weaving type degrees. Every single humanities class I took in college was utterly useless. Advocates claim you're learning how to read and write competently but I learned that from business school, not sociology and history.
- shmerl 5y ago
  Student are in debt either way. So I don't see how it aligns anything except for those who profit on it.
  - b9a2cab5 5y ago
    Because for some students the debt is paid off quickly, so in the long run the lower taxes from the state not paying for everyone's education make that student better off. For other students with useless degrees, the consequences of their actions come home to roost with their debt. That being said I do think student debt should be dischargeable in bankruptcy. As is the market for education is dysfunctional.
    - shmerl 5y ago
      Define "useful" here. Lot's of people with useful education struggle with paying off their debt. There is something pretty crooked in such attitude.
      - b9a2cab5 5y ago
        Objectively, from the statistics, that's just not the case. Average undergraduate student loan debt in public California schools was $23,600 in 2019 [1]. That is less than the price of most new cars. [1]: https://www.sacbee.com/news/politics-government/capitol-alert/article233713687.html https://www.sacbee.com/news/politics-government/capitol-aler...

VWWHFSfQ 5y ago

This is interesting data but I'm having trouble understanding it. For instance, several years ago there was a blog posted on here about a lady that took a $250,000 loan to go to Duke University to get a Theater Management degree. She then discovered that she was, in fact, never going to be able to pay back that money, so she wrote this blog post about how awful and predatory the USA higher education system is, and that she was now running off to Russia with her (Russian) husband so that she could escape the crippling debt. Now, there are certainly problems with the cost of higher education in USA, but that's not an example of it. Her problem was entirely different and pretty much of her own making, as far as I'm concerned. Nobody is going bankrupt trying to go to Central Detroit Community College. Or even most in-state universities. So I'm trying to understand these numbers.

jrochkind1 5y ago
What don't you understand about those numbers?
Retric 5y ago
News stories are always looking for the extreme examples, someone with 10k in student debt and a stage 4 cancer is also never paying back their loans. However, Delinquency in the article just means they missed one or more payments. That’s really easy to do even for people who eventually pay back their loans.
- dan-robertson 5y ago
  Default in the article is defined a few different ways (and they also talk about delinquency and loans in forebearance) but roughly corresponds to a year or so of missed payments.
  - Retric 5y ago
    Default should generally be 270 days.
mensetmanusman 5y ago

fn-mote 5y ago

This page is very frustrating to read. There is no way that it has enough information to make any informed conclusion. I feal like a real analysis needs to drill deeper into the data. Why are students not repaying their loans? After a student is "in default" on a loan (no payments for a year), do they ever pay it off? Being in default isn't like bankruptcy; the debt is still there and there may be reasons later to pay it off. I know at least some institutions that will not release transcripts while they are owed money; I don't know if there are any incentives to keep paying student loans. The risks of default broken down by course of study is there, very roughly, but would more detail reveal the issues more clearly? I'm sure that economists and think tanks have studied this problem. Maybe someone can post a link to some good article or survey on the topic.

dan-robertson 5y ago

The system in the U.K. is income-based repayment with automatic forgiveness after 30 years and an interest rate linked to inflation and income (your interest rate is up to 300bp higher if your income is higher). In some sense this is good because it avoids defaults or unmanageable repayments, but it can be a bit unegalitarian in how different people are affected: those with low incomes are ok but they have low incomes, those with particularly high incomes get to pay the loans off quickly and so don’t have much interest whereas those who follow a more common or somewhat good career progression will end up paying the loan off slowly with a lot of extra income. Furthermore, those people who had more family support would have lower principals and so would pay off less. So it comes out a bit like a graduate tax but borne most by people with middle incomes.