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U.S. NEWS Wednesday 15 March 2017

US Financial Front:

American student loan defaults rising, study finds

that,” Chopra said. en largely by student debt or a grace period so are
Other reports have also and auto debt. not at risk of default.
painted a bleak picture for It found that student loan The CFA also said Tuesday
student loan borrowers in defaults jumped sharply in that the report validates
the U.S. 2012 and the default rate some of the recent claims
The New York Federal Re- has held fairly steady since. made by federal regulators
serve, which looks at slight- But the NY Fed also warned that the nation’s largest
ly different data, reported that the true number of loan servicer put borrowers
last month that total house- people unable to pay is at greater risk for default by
hold debt in America in much higher because failing to help them find the
2016 began nearing its pre- about half of loans are in best repayment plans for
vious peak from 2008, driv- forebearance, deferment their needs.q

Brooklyn College students walk between classes on campus in
New York.
(AP Photo/Bebeto Matthews)
SARAH SKIDMORE SELL ing costs of college.
AP Personal Finance Writer The Federal Reserve System
The stock market is up, un- puts the measure slightly
employment is down but higher at $1.4 trillion, as
things aren’t rosy for all it includes private loans
Americans. as well. Defaulting on a
A new analysis of govern- federal student loan can
ment data by the Consum- be a financial disaster for
er Federation of America the borrower. Unlike other
found that the number of types of debts, most feder-
Americans in default on al student loans cannot be
their student loans jumped discharged in bankruptcy.
by nearly 17 percent last Those who go into default
year. face serious repercussions
As of the end of 2016, there including wage garnish-
were 4.2 million Federal Di- ment, damaged credit
rect Loan borrowers in de- scores and potentially add-
fault, meaning they’ve not ed costs in fees, interest
made a payment in more and legal fees.
than 270 days. That’s up Student debt has risen
from 3.6 million at the end along with the cost of ed-
of 2015. ucation, which makes re-
“Despite all improvements payment difficult. The av-
in the economy, student erage amount owed per
loan borrowers are still borrower rose to $30,650 in
struggling,” said Rohit Cho- 2016, after rising steadily for
pra, senior fellow at the years. In 2013, borrowers on
Consumer Federation of average owed $26,300.
America and formerly the The good news is that the
Consumer Financial Pro- number of people who are
tection Bureau’s Student defaulting for the first time
Loan Ombudsman. is down. But the number of
As of the end of 2016, 42.4 people defaulting for the
million Americans owed second time or more is up.
$1.3 trillion in federal stu- And that worries the CFA,
dent loans, according to an association of more
the U.S. Department of Ed- than 250 nonprofit consum-
ucation data. This doesn’t er groups
include borrowing through “We thought in an improv-
private student loans, cred- ing labor market, default
it cards, and home equity rates would improve but
loans to finance the grow- we simply are not seeing