Report Highlights. 5.47% of all student loan debt is in default in 2021, but this dropped to below 1% through the Federal New Start Program.
- An average of 8.15% of student loan debt is in default at any given time.
- Since 2011, an annual average of 471,000 students have defaulted after their second year in repayment.
- Roughly 4.6 million students enter the repayment phase each year each year.
Related reports include Student Loan Debt Statistics | How Do People Pay for College? | Average Time to Repay Student Loans | Average Cost of College | Economic Effects of Student Loan Debt | Student Loan Refinancing
Student Loan Default Statistics
Student borrowers who attended private for-profit colleges are the most likely to default on their loans, whereas private non-profit college attendees are the least likely to default.
- 92.8% of all outstanding student loan debt is held by the federal government.
- 10.3% of student borrowers default on their educational loans within their first 3 years of repayment.
- 25% of borrowers in Texas default within their first five years of repayment.
- 14.7% of student borrowers who attended a private, for-profit college defaulted within three years of beginning repayment.
- 6.39% of private non-profit college attendees defaulted within three years of beginning repayment.
- At age 30, roughly 10% of bachelor’s degree holders have defaulted on student loans, whereas over 20% of associate degree holders have defaulted on student loans.
- Student borrowers who attended private non-profit less-than-2-year institutions were most likely to default on their loans within 3 years of beginning repayment.
- Arts and Humanities majors who attended non-selective schools are the most likely to default on their student loans.
- U.S. Department of Education surveys of recent graduates show that 21.8%of Black/African American student loan borrowers have defaulted on a student loan.
- 10.1% of Hispanic/Latino and 6.1% White/Caucasian of recently graduated student loan borrowers report defaulting on their student loans.
What Happens When Your Student Loans Default
Defaulting on student loans can have long-term or even irreparable consequences.
- The loan is immediately due in its entirety. Upon default, the entire outstanding balance of a borrower’s student loan as well as any interest becomes due.
- You lose benefit eligibility. A borrower who has defaulted on a federal student loan loses eligibility for future benefits. This may include further student aid, deferment or forbearance of payment, and even tax benefits.
- Your credit score declines. Defaulted student loans are reported to credit bureaus. As a result, you may not be eligible to receive other types of loans, such as home and auto loans. It can take years to undo the damage.
- You lose income. Wage garnishing and withholding tax refunds are other ways government and private lenders may collect on defaulted loan payments. A lender can arrange to have your employer withhold a portion of each paycheck to be paid directly to the lender.
- You may be subject to legal action. In order to collect garnished wages, lenders may sue you in court. You may then also be charged for any court costs or other fees related to the lawsuit.
- Schools may withhold your proof of attendance. Depending on the type of institution you attended, a school may withhold academic transcripts. It is legal for colleges to do this but not required. This practice is set to be banned in July 2024.
How to Get Student Loans Out of Default
It is possible to restore good standing, but it may take several months or years. Some default solutions may restore benefits lost due to student loan default.
- Repay loans immediately and in full – this is unreasonable for most student borrowers.
- Student loan forgiveness or loan discharge may be possible with defaulted loans, such as discharges due to death or fraud.
- Loan consolidation is the most common method indebted borrowers use to pay off loans in default.
- Consolidating loans joins multiple loan debts, effectively giving the borrower one large loan to pay off instead of many smaller ones.
- If you make three voluntary, consecutive defaulted loan payments on time, you may choose from one of the repayment plans available for Direct Loan Consolidation borrowers.
- Consolidation offers new opportunities for income-based and extended payment plans.
- Loan rehabilitation may take several months while loan consolidation works faster.
- Loan rehabilitation may remove the record of default from the borrower’s history but loan consolidation does not.
- In order to qualify for loan rehabilitation, borrowers must apply within 20 days of default.
- A loan may only undergo rehabilitation once; if the borrower defaults again on the same loan, rehabilitation will not be possible.
- Fresh Start Program is a one-time temporary program that offers special benefits for borrowers with defaulted federal student loans which can restore access to federal benefits.
- The Fresh Start program will end on September 30th, 2024.
Student Loan Delinquency Statistics
Federal student loans default 270 days after a missed repayment, almost nine (9) months. Before that, student loan payments are considered delinquent. After 90 days of delinquency, the late payment is reported to the three major national credit bureaus. Most people are late making a student loan payment at least once. Among those that do, few do so habitually.
- 25% of borrowers in Texas default within their first five years of repayment.
- 0.84% of student loan borrowers are 90+ days delinquent but not yet in default.
- 89% of Student loan borrowers in Texas who never suspended their payments defaulted in their second year of repayments.
- 21% of Texas student loan borrowers increased their loan balance after 5 years, and 98% of borrowers whose balance increased had paused their payments at least twice.
- 45% of student loan borrowers in Texas were able to decrease their loan balance after 5 years of their repayment plan and did not default on their loans.
| State |
2020 Borrower Delinquency Rate |
2022 Borrower Delinquency Rate |
|---|---|---|
| Alabama | 11.90% | 1.70% |
| Alaska | 10.30% | 1.40% |
| Arizona | 11.00% | 1.00% |
| Arkansas | 12.00% | 1.30% |
| California | 8.70% | 1.10% |
| Colorado | 8.50% | 1.10% |
| Connecticut | 7.90% | 1.90% |
| Delaware | 9.00% | 1.70% |
| District Of Columbia | 10.50% | 1.40% |
| Florida | 10.30% | 1.30% |
| Georgia | 11.60% | 2.10% |
| Hawaii | 9.90% | 1.10% |
| Idaho | 8.40% | 0.70% |
| Illinois | 8.50% | 1.40% |
| Indiana | 11.00% | 1.80% |
| Iowa | 8.50% | 1.30% |
| Kansas | 9.80% | 1.20% |
| Kentucky | 11.80% | 1.30% |
| Louisiana | 11.80% | 1.90% |
| Maine | 7.70% | 1.20% |
| Maryland | 8.80% | 1.60% |
| Massachusetts | 6.50% | 1.50% |
| Michigan | 10.40% | 1.30% |
| Minnesota | 7.30% | 1.40% |
| Mississippi | 14.10% | 2.10% |
| Missouri | 10.50% | 1.40% |
| Montana | 8.50% | 0.90% |
| Nebraska | 6.90% | 1.00% |
| Nevada | 12.40% | 1.30% |
| New Hampshire | 6.90% | 1.50% |
| New Jersey | 7.70% | 1.80% |
| New Mexico | 12.80% | 1.40% |
| New York | 6.60% | 1.60% |
| North Carolina | 10.30% | 1.50% |
| North Dakota | 7.70% | 1.10% |
| Ohio | 10.60% | 1.50% |
| Oklahoma | 11.70% | 1.30% |
| Oregon | 10.40% | 1.00% |
| Pennsylvania | 9.10% | 2.00% |
| Rhode Island | 8.20% | 1.50% |
| South Carolina | 11.50% | 1.60% |
| South Dakota | 7.20% | 1.30% |
| Tennessee | 11.60% | 1.60% |
| Texas | 10.50% | 1.60% |
| Utah | 7.40% | 1.00% |
| Vermont | 6.40% | 1.80% |
| Virginia | 8.40% | 1.20% |
| Washington | 7.90% | 1.00% |
| West Virginia | 12.70% | 1.60% |
| Wisconsin | 7.90% | 1.20% |
| Wyoming | 8.70% | 0.80% |
| Puerto Rico | 13.60% | 1.40% |
Sources
- NCES, Digest of Education Statistic
- U.S. Department of Education (ED) Office of Federal Student Aid (OFSA), Student Loan Delinquency and Default
- PEW Research Center, Student Loan System Presents Repayment Challenges
- Liberty Street Economics, Who Is More Likely to Default on Student Loans?
- New York Fed, Student Loan Update 2022
- Federal Student, Getting Out of Default
- U.S. Department of Education. National Center for Education Statistics. Baccalaureate and Beyond 2016-2020, Table: Ever defaulted on student loans, as of the B&B:16/20 survey by Race/ethnicity (with multiple).
- Nerd Wallet: Can a College Withhold Transcripts?