Balance Of Student Loans In Default Soars To Over $137 Billion

Tyler Durden's picture

Last week we noted a survey from LendEDU which found that 31% of college co-eds spend at least some portion of their student loan debt proceeds to fund week-long hedonistic, binge drinking trips to Cancun and Daytona Beach for spring break.  And, just to add insult to injury, 24% said they spend those taxpayer-subsidized loan dollars on drinking at school and 7% even splurge on drugs (see "31% Of College Students Spend Their Loans On Spring Break"). 

In light of those findings, it probably shouldn't be terribly surprising that, according to new data published by the U.S. Department of Education, $137 billion of federal student loans were in default as of December 2016, a 14% year-over-year increase.  Key findings from the Consumer Federation of America:

Average amount owed is $30,650 per federal student loan borrower. Average amount owed per borrower continues to tick up, rising 17% since the end of 2013, when borrowers owed on average of $26,300.


$137 billion in default. For federal loans originated by financial institutions (FFEL) and the US Department of Education (Direct), a total of $137.4 billion in balances were in default, a 14% increase from 2015. This cumulative level of defaulted balances includes loans which defaulted in previous years. Defaulting on a federal student loan comes with severe consequences. Borrowers can face seizure of their tax refund, garnishment of their wages, and an inability to pass employment verification checks.


1 million Direct Loan defaults in 2016. In 2016, 1.1 million Federal Direct Loan borrowers defaulted. Federal law typically defines a federal student loan default as being 270 days past due. Borrowers defaulting for the first time slightly decreased compared to 2015, though borrowers re-defaulting slightly increased compared to 2015.


Data withheld for new defaults in bank-based student loan program. The Education Department did not release data on loans entering default in the bank-based FFEL program. The largest holder of these loans is Navient, with $87.7 billion in outstanding loans as of the end of 2016. “With more than 16 million Americans still on the hook for bank-based federal student loans, the cost of being kept in the dark is real,” said Chopra.


Total federal student loan portfolio increases $79.4 billion. Total outstanding federal student loans, including loans owned or guaranteed by the government, increased $79.4 billion in 2016, roughly the same as the $80.2 billion increase in 2015.



Ironically, these soaring defaults come despite Obama's executive actions setting up "income-driven repayment" (IDR) plans specifically intended to lower the burden on borrowers and avoid defaultsAs the Wall Street Journal recently pointed out, Obama's so-called IDR plans set caps on borrowers' monthly student loan payments at 10% of discretionary income, which is defined as earnings above 150% of the poverty level.  Then, whatever principal balance is left over on the loans at their maturity date is simply 'forgiven' (which is government speak for "repaid by taxpayers"). 

The report, to be released on Wednesday by the Government Accountability Office, shows the Obama administration’s main strategy for helping student-loan borrowers is proving far more costly than previously thought. The report also presents a scathing review of the Education Department’s accounting methods, which have understated the costs of its various debt-relief plans by tens of billions of dollars.


Senate Budget Committee Chairman Mike Enzi (R., Wyo.) ordered the report last year amid a sharp increase in enrollment in income-driven repayment plans, which the Obama administration has heavily promoted to help borrowers avoid default. The most generous version caps a borrower’s monthly payment at 10% of discretionary income, which is defined as any earnings above 150% of the poverty level.


That formula typically reduces monthly payments of borrowers by hundreds of dollars. Any remaining balance is then forgiven after 10 or 20 years, depending on whether the borrower works in the public or private sector.


Enrollment in the plans has more than tripled in the past three years to 5.3 million borrowers as of June, or 24% of all former students who borrowed directly from the government and are now required to be making payments. They collectively owe $355 billion.

While Congress originally approved the IDR plans in the 1990s and 2000s, Obama used executive actions, starting in 2010, to extend the most-generous terms to millions of borrowers which is precisely when loan volumes under the program started to skyrocket.

Student Loans


Congrats,'ll soon have the privilege of repaying $137 billion worth of debt spent by entitled millennials on binge-drinking trips Cancun and, after all, is just a little bit better when we spread the wealth around....

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knukles's picture

Some folks just have no sense of humor.
It's not a loan, it's a right.

BTW, saw a guy today with a tee shirt on that said "Climate Justice"
WTF is Climate Justice?  Everybody gets the same climate or at least a Climate Participation Cerrtificate?

xythras's picture
xythras (not verified) bamawatson Mar 14, 2017 6:26 PM

Only regressive leftard mutts are inferior enough to sell themselves into debt in order to go to a college to study arts & women studies. That's because the untermensch comes from Africa, not like Whites: 

No More Faux African Origin: Scientists Find 400,000 Year Old Fossil of Human Brain in Portugal


REJOICE. Another hoax debunked

City_Of_Champyinz's picture

I wonder what the percentage is of these loans that was used for an $80,000 major in puppeteering?

VD's picture

$137 billion is like less than 2 months of QE at $80 billion/mo. chump change. and how do you think stawks like AAPL and AMZN got that extra boost? student loans paid for many of the iGadgets and online crap sold. this ponzi will blow.

Ballin D's picture

Wait till liberals realize that getting rid of illegals could cover the entire bill in just over a year.

VD's picture

u think libtardz figure things like that out? u got more faith in stupid than me.

City_Of_Champyinz's picture

Oh they figure it out, they are just always 100% wrong and take the opposite side of common sense...

lexxus's picture
lexxus (not verified) stizazz Mar 14, 2017 7:57 PM

I aint payin mine back.

techies-r-us's picture
techies-r-us (not verified) lexxus Mar 14, 2017 7:57 PM

And why should u? U aint got no job.

Got The Wrong No's picture

The 3 Stooges are taking to themselves again. The same Moron with three aliases. 

Peak Finance's picture

No, not correct

137 billion is just 14% of the loans outstanding

At least 33% ish of that paper is impaired in some way right now

How much of that other 66% is good do you think?

So, this is actually a 1 trillion dollar problem

Giant Meteor's picture

I automatically assume the numbers are fucked, dumbed down, and in fact far worse that presented ..

That is like, a rule ...

Have to step out a minute but shall return to see the comment I was responding too ..

Thanks, we'll go with your numbers ..

edit; ok I see the confusion .. THIS is what I was responding too ..

 stawks like AAPL and AMZN got that extra boost? student loans paid for many of the iGadgets and online crap sold. this ponzi will blow.


Giant Meteor's picture

I don't know about puppeteering, but I see recent graduates from HVAC schools, and guess what, they are fucking CLUELESS, to what is involved in the trade .. 2 years, HVAC, NO field experience, cuz you know, we just don't do that anymore ..

It is meaningless.  But the GOVERNMENT, in cahoots with the education complex, has a heavy hand in pushing this shit, and other shit, and it is purely EXTRACTIVE  .. it is about making money, to teach meaningless bullshit, to satisfy the "shareholders" and pay for THEIR fucking way of life, and I'll tell you, it some really really sad and evil shit ...

crossroaddemon's picture

Its the same way with people that get those two year sound production degrees. Unless you get it at one of those specialized schools that nobody can afford it's fucking WORTHLESS. I deal with new graduates with degrees and usually you have to start all over with them.

City_Of_Champyinz's picture

OMG Meteor you are 1000% correct, one of my best friends/former roomate is an expert HVAC/Plumber/Electrician (I used to be his helper bitch when I was out of work years ago), and he has been saying the same shit for years.  He is regularly called out to fix the new hire fuckups as he is the best at his company.  He was taught the trade by his Uncle while he was a kid.

algol_dog's picture

What's the difference? Just print the money and pay it off at the federal level. 

SixIsNinE's picture

major in clowning - puppeteering as a minor.
then it'd probably be worth it.

Cognitive Dissonance's picture

"Federal law typically defines a federal student loan default as being 270 days past due."

Please remember that they measure student loan 'default' by one statistic only. Those who actually wrote a letter to the government saying "Fuck you, I ain't paying my loan."

Imagine if they actually measured default by those who had not made a payment in 3 months, like your average home mortgage or personal loan.


DeathMerchant's picture

Sounds like they need some Student Loan Repayment Motivation Squads

Lumberjack's picture

They need to compile a list of what schools were being attended when said default occurred. Look for patterns then work the problem from there.

Cognitive Dissonance's picture

I found a list of the top three.

Tip Toe Through The Tulips Blue State University

Be A Car Mechanic In 16 Years Or Less Technical College of Washington DC

Navel Gazing Accredited College of California

Seems legit to me.

Lumberjack's picture

Remember back in the good ol days when richie rich would go to harvard or yale, somehow get a degree (wink) and then file for bankruptcy shortly thereafter.

E.F. Mutton's picture

Climate Justice.  Fuck Me.

According to average life span I have 17 years left.

I was hoping to reach the finish line before the American Royal Flush, now I'm not so sure.

847328_3527's picture

Silly article; I have full faith in our young!


Teen who shot self in head playing Russian roulette dies

E.F. Mutton's picture

Sad part is, it was probably an automatic.

knukles's picture

No no no no no
That's first place in the Darwin Awards, dude.

Canary Paint's picture

You know that feeling when you are scrolling through the comments and a bit of gallows humor jumps out at you... And maybe you would have stifled your laugh if you had a moment to think about it... But it was a surprise so you laughed completely without reservation... You just gave me that moment.

NoPension's picture

Probably using a semi auto.

Bad fucking odds.

unsafe-space-time's picture

I guess climate is gay because it produces rainbows. And your pollution makes it more gay so there needs to be more balance because muslims don't like rainbows.

Proctologist's picture

"Climate Just-us".

Get one of those shirts made. Don't forget the egg-resistant coating for the SJW reaction when you give the explanation for the "mis-spelling".

No participation prizes w/o the correct viewpoint!


chubakka's picture

none of these "students" deserve to be in school.  

Giant Meteor's picture

I think that is beside the point ...

Poor dum bastards were sold a bill of goods anyway ..

Wealth extraction system number, fuck I'm loosing track.


exactly ...

edit; Also, Get JP Morgan Chase out of the FOOD STAMP BUSINESS ..

Get Wallstreet out of the PRISONS FOR PROFIT business etc etc ..

MEFOBILLS's picture

Wealth extraction system number, fuck I'm loosing track.


That's right.  The system is designed to take rents and extract unearned income.  College loans are set up for bankers:  Heads I win, tails you lose.  

If a student defaults, then government makes banker loan good.

Adding interest to loan raises price, and the future has to pay that price in form of higher wages.  Hence, college is one more higher cost that American labor must carry, making American labor less competitive.

A competitive economy lowers prices.  A lower price economy would only send its best and brightest to college, and even then it would be priced so their labor would be competitive.

During sovereign money era in Canada (38-74), MOF (ministry of finance) instructed BOC (bank of Canada) to spend debt free building college infrastructure.  This then built out colleges, which had no interest overhead.  Students could then go to university for low cost.

Here is a debt chart for Canada during sovereign period:

Note debt takeoff is only after 1974, when Canada converted to a debt spreading system like U.S.

VWAndy's picture

 Yep now that all the Starbucks jobs are gone they are so screwed.

knukles's picture

I'd like a double Americano, please. 

Giant Meteor's picture

Its been over , the body is twitching a little bit cuz its still receiving some left over signals from the brain stem, 

Fucking lies and bullshit are epic ...


Overdrawn's picture

On the topic of getting screwed:

Sex toy espionage: Vibrator maker to pay out $3mn for tracking customer usage

The bluetooth enabled vibrator allows the sex-toy to be controlled remotely and is described on its website as enabling couples to “connect in new, exciting ways — whether they’re in the same room or on a different continent. Push play.”

What was not advertised, however, was the fact that the Canadian company collected intimate personal data on customers without their knowledge. The collected data was sent back to Standard Innovation, informing the company about how often the devices were used and for how long, as well as the device’s temperature and vibration intensity.

847328_3527's picture

I'd like to work in the research lab that developed that thing.


However, I'm thinking more along the lines of Melania or Ivanka....and not Rosie O'Donnell or Cankles the research participants.

crossroaddemon's picture

That is just... just... well, fucking funny actually.

CRM114's picture

With a bit of research, one could probably work out which orifice / gender it was being used on.

unsafe-space-time's picture

How? Does it have an anal setting? Maybe an odor sensor?

w4mps's picture

In other words, the majority opinion is --- if you pay your student loans, you're a sucker.  Free education at taxpayer expense, through the back door.   In so many ways, this is symptomatic of how screwed up the integrity of our country is.  Not sure when this disease started, but as recently as the 60's (when I went to college) it would have been considered a disgrace to default on your student loans.  You would have begged your family for a bailout, not the American taxpayer. What the hell. Add a few more billion to our national debt. No conesequences to date (tick, tick, tick).


NoPension's picture

I'm thinking of going back to school. Get that degree I never thought was important, as a yoot. 

Maybe be a doctor or lawyer. They do well, right? 

I'm 55. I figure by the time I'm done, I can collect sociable security.

And all that young poo tang got to be good for something.

Anybody know if they discriminate based on age?

Sitting around in climate control all day, reading and listening. What a job! Youth is wasted on the young. And I love tests, to boot! 

Giant Meteor's picture

Its never too late ...

I mean I figured as long as we were lying ..