What lies ahead for borrowers grappling with student loan debt?

Over the past decade, student loan debt has increased 136%, and has maintained a higher level of serious delinquencies in recent years compared to other loan types such as credit card, mortgage, auto loan, and home equity revolving credit. Regulation has been created to provide support to student loan borrowers, and a better understanding of the Obama-era rules and the Trump administration’s proposals can provide some insight for what may lie ahead.

Student loans, which are at $1.4 trillion, account for 10.7% of overall household debt. Student loans are the second-largest consumer debt category, overtaking credit card debt and auto loans. A decade ago, student loan debt accounted for less than 5% of household debt.

Increases in the cost of secondary education and the long-term growth in enrollment explain the lion’s share of the triple-digit percentage jump in student loans over the past decade. Student loans are also a function of enrollment, which grew from 15.3 million students in 2000 to 20.8 million in 2010, a nearly 37% increase.

Rising levels of student debt are not nearly as important a question as delinquencies, which, though moderating somewhat, are elevated. In fact, starting in 2012 the delinquency rate for student loans topped those for auto, credit card, and mortgages. Over the past decade, the delinquency rate for student loans 90 or more days delinquent has climbed from 7.6% to 11.5% as of the third quarter of 2018, according to the Federal Reserve Bank of New York.

As alarming as this 11.5% rate of delinquency is, it could be an underestimate of the actual rate of delinquency. This is because about half of outstanding loans are currently in deferment, grace periods, or forbearance.

To read more about the bumpy ride ahead for student loans and regulation, read this article by Milliman’s Leighton Hunley and Katie Pipkorn.

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