New statistics from the Department of Education show that 500,000 more student loan borrowers entered into default in the past year. More than one in eight total outstanding loans is now in default, and more than one in five borrowers is at least a year behind on payments. The overall default rate on taxpayer-funded student loans rose from 12.8 percent in 2013 to 13.5 percent in 2014.
To address the escalating problem, Sen. Elizabeth Warren (D-Mass.) is pushing dramatic cuts to student loan interest rates. Others have come up with approaches to financing higher education that include small savings accounts. These and other ideas, however, would not help borrowers already trying to repay student debt. The Center for American Progress has suggested that students be enrolled in income-based repayment programs automatically. Another idea involves a public-private partnership between the federal government and banks to refinance existing loans at more affordable rates. Other proposals call for lawmakers to let student loans be discharged in bankruptcy.
Default rates are only part of the picture, as millions of borrowers are 90 days behind on payments but not yet in default. A Federal Reserve Bank of New York study published in April found that more than 30 percent of borrowers who should be repaying their student loans are delinquent, almost twice the 17 percent delinquency rate shown in official data.