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Delinquency: The Untold Story of Student Loan Borrowing

Cunningham, A. & Kienzl, G. Delinquency: The Untold Story of Student Loan Borrowing. Institute for Higher Education Policy, Washington, 2011. Pages: 42.  

The latest publication from the Institute for Higher Education Policy (a Washington DC- based research organisation) examines the student loan repayment patterns and experiences of the approximately 1.8 million individuals who entered repayment in 2005. The analysis is based on data from five of the largest student loan guaranty agencies in the US: American Student Assistance, ECMC (formerly CSAS/EdFund data only), Great Lakes Higher Education Guaranty Corporation, Texas Guaranteed and USA Funds. Such agencies insure against default those student loans made through the Federal Family Education Loan Program (FFELP).

During the first five years of loan repayment, the report finds that approximately

  • 37% of those who entered repayment in 2005 were able to make timely loan payments, without postponing payments or becoming delinquent;
  • another 23% of the borrowers in the aforementioned cohort used postponement mechanisms (i.e. applied for deferment and/or forbearance) to avoid loan delinquency;
  • 26% of the borrowers became delinquent on their loans at some point, but did not default; and
  • 15% of borrowers were delinquent and defaulted on their loan.

The authors note that the implications of their study are limited due to the restricted demographic and enrolment data of the borrowers, and to exclusion of data on the activities of private loan borrowers. Nevertheless, the report offers tangible recommendations to further understand and combat the growing phenomenon of delinquency: to promote financial literacy among borrowers as, many students are not aware of the options from which they may choose; to introduce institutional models for default prevention; and to incorporate such studies into policy and practice in order to gain a clearer picture of the patterns associated with borrowers.

Institute for Higher Education Policy