7 Million People Haven't Made A Single Student Loan Payment In At Least A Year

Tyler Durden's picture

Perhaps it’s all the talk about across-the-board debt forgiveness or maybe the total amount of outstanding student debt has simply grown so large ($1.3 trillion) that even those with no conception of how much money that actually is realize that it’s simply never going to paid back so there’s no point worrying about, but whatever the case, the general level of concern regarding America’s student debt bubble doesn’t seem to be at all commensurate with the size of the problem. 

And it’s not just the sheer size of the debt pile that’s worrisome. There’s also the knock-on effects, such as delayed household formation and the attendant downward pressure on the homeownership rate, and of course hyperinflation in the rental market. 

Of course one reason no one is panicking - yet - is that the severity of the problem is masked by artificially suppressed delinquency rates. As we’ve documented in excruciating detail, if one excludes loans in deferment and forbearance from the numerator in the delinquency calculation, but includes those loans in the denominator then the delinquency rate will be deceptively low. In any event, as WSJ reports, even if one looks at something very simple like, say, the number of borrowers who haven’t made a payment in a year, the picture is not pretty and it’s getting worse all the time. Here’s more:

Nearly seven million Americans have gone at least a year without making a payment on their federal student loans, a staggering level of default that highlights how student debt continues to burden households despite an improving labor market.


As of July, 6.9 million Americans with student loans hadn’t sent a payment to the government in at least 360 days, quarterly data from the Education Department showed this week. That was up 6%, or 400,000 borrowers, from a year earlier.


The figures translate into about 17% of all borrowers with federal loans being severely delinquent—and that share would be even higher if borrowers currently in school were excluded. Additionally, millions of other borrowers who haven’t hit the 360-day threshold that the government defines as a default are months behind on their payments.


Each new crop of students is experiencing the same problems” with repaying, said Mark Kantrowitz, a higher-education expert and publisher of the information website Edvisors.com. “The entire situation isn’t getting better.”


The development carries big implications for borrowers, taxpayers and the economy. Economists have warned of student-debt defaults damaging borrowers’ credit standing, which would hurt their ability to borrow for things like cars and homes. That in turn would hamper the economy, which relies heavily on consumer purchases for economic activity. Delinquencies also drain government revenues, which are used to make future loans.

So what’s the solution you ask? According to the government, the answer is the income based repayment plans. Here’s The Journal again:

Education Secretary Arne Duncan said declines [in some categories of delinquencies] resulted from rising participation in income-based repayment plans, which lower borrowers’ monthly bills by tying payments to their incomes. Enrollment in the plans surged 56% over the past year among direct-loan borrowers.


The administration has urgently promoted the plans, mainly through emails to borrowers, over the past two years in an effort to stem defaults. The plans set payments as 10% or 15% of their discretionary income, defined as adjusted gross income minus 150% the federal poverty level.


The plans carry risks, though, for both borrowers and the government. Many borrowers’ payments aren’t enough to cover the interest on their debt, allowing their balances to grow and threatening to trap them under debt for years.


At the same time, the government could be left forgiving huge amounts of debt if borrowers stay in the plans. The government forgives balances after 10, 20 or 25 years of on-time payments, depending on the plan.


But aside from the fact that these plans will cost taxpayers an estimated $39 billion over the next decade - and that’s just counting those expected to enroll in plans going forward and ignoring the $200 billion or so in loans already enrolled in an IBR plan - the most absurd thing about Duncan’s claim is that, as we’ve shown, IBR programs don’t drive down delinquency rates, they just change the meaning of the term "payment":

See how that works? If you can't afford to pay, just tell the Department of Education and they'll enroll you in an IBR plan where your "payments" can be $0 and you won't be counted as delinquent.

So we suppose we should retract the statement we made above. You are correct Mr. Duncan, these plans are actually very effective at bringing down delinquencies and the method is remarkably straightforward: the government just stopped couting delinquent borrowers as delinquent.  

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CaptainAmerika's picture
CaptainAmerika (not verified) Aug 22, 2015 10:45 AM
Hugh G Rection's picture

No bankruptcy on student loan usury!  


Go get those worthless degrees kids and get in 6 figure debt for jobs that don't exist anymore.  

corporatewhore's picture

there is a lot of background on donations and contributions and lobbying that should be inspected regarding the non-ability to discharge student loans in bankruptcy.  Where is a decent journalist who has some time to "watergate" this for Rolling Stone?  I digress, they're too busy investigating phony rape charges at UVA.

HRH Clinton had a fundamental involved role in this nonsense.  I'm sure there was a payback--there always is with that family.  Someone got a huge payoff for the "reformation" of bankruptcy laws.

Central Bankster's picture

Not allowing someone to discharge unsecured debt is truly heinous.

Captain Debtcrash's picture
Captain Debtcrash (not verified) Central Bankster Aug 22, 2015 12:03 PM

Not a bad candidate for a critical mass default at some point, but then again there are a lot of good candidates. 

remain calm's picture

Can we do this with car loans too, my son needs a car and he is at college, he needs a way to get home from the parties at 4am? It would really help him and a lot of other students too. Thanks Mr Government.

Manthong's picture

Sub-Prime Students


..but what else could you expect from a greedy and sub-prime educational system.



Skateboarder's picture

Commencing Fed purchases of Student Loan Backed Securities in 5... 4... 3...

max2205's picture

Time to go back to school now that it is free.....  FSA FSA fsa!

quartshort's picture

So... if I stop making my car or house payments the bank will repossess them. 

Lobotomies for those with non-payment of student loans?

corporatewhore's picture

car loans are secured and mr. repo comes and gets them.  You can discharge the obligation in BK (the debt) but the car is returned.  Your credit is trashed but you will recover.

If I am understanding you correctly.

Crash Overide's picture

I am one for paying off my debt but when you pay a shit ton of taxes/fees to an irresponsible out of control greedy and corrupt government why should you pay them back.

If people really wanted to vote and send a message, I recommend withholding any tax payments to the government until the corruption is rooted out but that if fucking crazy talk.




Did you know humans are the only species that pay to live on this planet, does that make sense to you?

StychoKiller's picture

I'm thinking that the Khalahari Bushmen/women don't pay to live on this planet.

ZD1's picture

Obama signed a bill in 2010 that ended a 45-year-old program under which banks and other private-sector lenders such as Sallie Mae receive a federal subsidy for making government-guaranteed college loans.

Instead, the U.S. Department of Education now makes 100 percent of guaranteed student loans.

Students who previously had to choose a private-sector lender for their guaranteed loans now have only one choice: the government (subsidized loans guaranteed by taxpayers).

Banks can continue to make private, non-guaranteed college loans, but these are generally more expensive than guaranteed loans.


tarsubil's picture

I feel sorry for anyone who has debt bigger than their annual income. My student loans were a pain and the closest I got was around 25% right out of undergrad with a crappy low paying job.

KnuckleDragger-X's picture

It's just another government slush fund used to control the people. They've put magic money everywhere in the economy and it doesn't matter if it's college, a house, or a car, the government owns you because you owe the government.....

Secret Treaties's picture
Secret Treaties (not verified) Hugh G Rection Aug 22, 2015 12:19 PM

Try to engage with reality:


Most of the time, a degee is well worth it.  Just not in Feminist Studies.

KnuckleDragger-X's picture

A lot of degrees have become politicaly correct and have lost their value, 'studies' degrees are just taking it to the logical conclusion.....

doctor10's picture

Jeez-our very own little Greece-right here at home!!

JLee2027's picture

Abandoment usually works. 

KnuckleDragger-X's picture

Yeah, but you have to get all the way out and the herd has becomed inured to a soft and easy life.....

fockewulf190's picture

That kind of life is going to vaporize very soon.  The herd will be thinned.  Math demands it.

saints51's picture

They have a fun camp coming soon for anyone with outstanding debt.

thatthingcanfly's picture

As an Established Man, I'd happily take in a 22-y-o recent college chick with a load of student debt. Or two or three. They can find me at EstablishedMen.com. Wait...

saints51's picture

I don't think it is that kind of fun camp, but hey we can dream right.

thatthingcanfly's picture

Sighs, lowers head dejectedly, turns and slowly walks away.

saints51's picture

It's ok. Lets find a solution. Place an ad in craigslist to pay off debt in return for your personal needs. This may work and could be expensive.

Another is to ask either a republican or democrat senator to make a bill and get it passed that allows you and others with a "license" to house these folks courtesy of taxpayer.

WOAR's picture

That sounds remarkably...like something that would work. In Atlas Shrugged.

Just imagine: Write your congressman, and say that, for the greater good, you'll take in these college students who are "valuable to the economy", but haven't "got on their feet yet."

Say that, instead of building more Section 8 housing for these...transitioning students...they could be allowed to stay in the homes of others, for some form of government subsidy.

It sounds positively grand.


Tortuga's picture

Yea, that'll work.

2 weeks of empty toilet roll, unflushed toilets, mess in the sink, unmade beds, loud music/tv, sleeping til noon+, no looking for a job, playing group games on ipod, leaving gas tank on empty, no food in refer, refer smell so bad the neighbors call the cops.

You'll stop at 1.

XqWretch's picture

lol you beat me to it... living with one girl must be a nightmare, cant even imagine living with multiple

Skateboarder's picture

Boy or girl, never ever live with a buncher! (one who bunches TP)

nmewn's picture

Foreclose on their books and seize their bongs!

Ignatius's picture

Launching one's work life after college indebted to the banksters is a valuable life lesson.  As valuable as getting a dose of non-specific the first time one holds a woman near.

onewayticket2's picture

Hillary or Bernie will bail out in exchange for votes.

divedivedive's picture

And what might Trump's solution be ? 

Son of Loki's picture

" Merikans are not deadbeats."


~ Barry

divedivedive's picture

Perhaps to build the Great Wall of Trump.


Actually a person with such a great business mind - such as Trump - should easily be able to create the jobs required to solve the student debt issue TODAY. Why wait until January 2017. He can get his buddy Icahn and perhaps Langone and just solve it. No ?

Handful of Dust's picture

Mesicans are going to pay for it and build it. Amerikans are too poor, obese, lazy, too busy watching Kim and Caitlyn 24/7 or tweeting their followers second by second.

divedivedive's picture

The Mexicans are very good at building walls and pyramids (and tunnels) that last centuries - and - it will probably come in under budget and ahead of schedule.

I am Jobe's picture

Wow and think how well the economy is doing. 

Parents keep sending Kids to college for them be be dumb. To think parents are smart uggh. 

Vincent Vega's picture

...'despite an improving labor market.' Bwaahahahaha!

tbd108's picture

"Despite an improving labor market"? What absolute crap. And the inflation rate is 2%. These lying and/or delusional jackasses should return to their native North Korea where they will feel right at home.

Stumpy4516's picture

You only have to read to "despite an improving labor market."  to realize it is just another propoganda piece.

Just like the way they are talking up "deflation" in a high inflation period.

Why?  Most likely so that they can put the student loans on the taxpayer thus allowing them to rinse and repeat while making money off of it.

And the deflation talk/lies/propaganda.  That is because they plan to increase, not decrease, the printing of money out of thin air. The thing deflating are the size of the contents in the packages of everything I buy.  Box stays the same though.

Once again, it will likely be made clear that the smart ones played the system and were irresponsible.  Took out loans, default and laugh at the suckers who, one way or another, actually paid for their college.  In some ways kids tend to be smart, they are being taught to be irresponsible, lie, milk the system and take whatever they can with no concern about ethics.  If you try you can see the future enviroment they will create during their prime.  It has already started, Clinton's, Bush's, Obama, Court System, Cops, Killing for Profits, and always lieing about it without a single twinge, like true sociopaths.  Under the surface it is all crap and the kids know it and will embrace it.


messymerry's picture

Hey Stumpy, stop with the reading the teal leaves dude.  You're going to creep out the sheeple and maybe cause a stampede. 

You are absolutely correct.  This is in reality a ""social"" collapse, and the money monkeys are chasing their tails trying to keep the boat off the rocks while the real problems we face are not in the money arena at all.  The monkey money is a SYMPTOM of the larger problem of social collapse.  Let's get with it here and start addressing the real problems of the day...

Just sayin',


q99x2's picture

UCLA has less than 4% default on their loans.

CHC's picture
CHC (not verified) Aug 22, 2015 10:59 AM

Yeah - the days of people taking personal responsibility and having self respect are long gone.  Most want something - anything - for nothing.  They're 'entitled'.  They deserve it.  You know what...FUCK YOU!!!!!

Heywood Jahblohmee's picture

All you scumbags who bash the people not paying don't have a problem with TRILLIONS, being wasted on WARS of AGGRESSION against innocent people who just want to have their own country.


Dre4dwolf's picture

Fuck Everyone

Everyone is equally fucked because of double book accounting , look.

Everyone who cant pay is fucked.

Everyone who is paying is being fucked.

+Fuck = -Fuck

If you still give two fucks your accounting is not following GAAP.


The only solution to the fuck fest is to start fucking like rabbits and cause another baby boom invest in baby stores, with any luck one of the new borns will be smart enough to solve the fuckups of the previous 3 generations. ^^. . .