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Are student loan borrowers effectively managing their student loan debt?

Many more student loan borrowers are having difficulty repaying their student loans than is generally recognized.

The Institute for Higher Education Policy (IHEP) studied data on 8.7 million student loan borrowers and 27.5 million student loans, focusing on the 1.8 million borrowers who entered repayment in 2005 and issued an illuminating report: Delinquency: The Untold Story of Student Loan Borrowing.

Student Loan Default Rates Don’t Tell the Whole Story

Default rates only tell us so much.  Deferment and forbearance allow borrowers to temporarily suspend repayment in times of financial stress and avoid delinquency and default.

A borrower isn’t considered “delinquent” on his student loan until after his payment is 60 days late.  A borrower faces “default” after another 270 days.

But how many borrowers manage to repay their student loans on schedule without having to postpone or delay payments?

Graduate and Professional Borrowers Struggle to Repay Student Loans

About 14% of the borrowers IHEP studied were graduate or professional students.

Although graduate and professional borrowers were less likely than other borrowers to have been delinquent or defaulted on their student loans, 42% couldn’t manage to make timely payments without either postponing their payments, becoming delinquent, or defaulting on their student loans.

Of graduate and professional borrowers entering repayment in 2005:

  • 19% faced delinquency or default
  • 22% had to temporarily suspend their student loan payments using deferment or forbearance options
  • Only 58% made timely payments without using deferment or forbearance options

Those who graduated with a degree fared better than those leaving school without attaining a degree

68% of graduate and professional students who earned their degree were able to repay without delay but only 47% of those who left before attaining a degree did so.

Graduate/Professional Students Left without degree Graduated All borrowers
Timely repayment 47% 68% 58%


Deferment/forbearance without delinquency 25% 20% 22%


Delinquency without default 24% 10% 16%


Default 5% 2% 3%


Total 100% 100% 100%


Does not include borrowers with consolidation loans

Source: Delinquency: The Untold Story of Student Loan Borrowing.

Borrower’s ability to deal with repayment problems depends on receiving good information

IHEP research found that borrowers:

  • Do not fully understand loan terms
  • Are rarely familiar with all the repayment options
  • Are often not aware of options that could have helped them manage their loans

Student loan borrowers need specific student loan repayment guidance and general financial literacy information in order to succeed.

Read the full report


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