hardly anyone is paying down their student loans [View all]

[Demovictory9]

Student debt is over $1.6 trillion and hardly anyone is paying down their loans
PUBLISHED THU, JAN 1

https://www.cnbc.com/2020/01/16/student-loan-debt-is-over-1point6-trillion-and-balances-arent-going-down.html


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Since the explosion of student debt following the Great Recession, annual repayment rates, or the amount of existing balances lowered, have been just 3%, Moody’s said. Just 51% of borrowers who took out loans from 2010-12 have made any progress at all in paying down their debt.

“While in the past, higher enrollment and rising tuition were the main drivers of growing student loan balances, more recently, slow repayments have become the primary driver,” Jody Shenn, senior analyst at Moody’s, and others said in the report. “Over the next few years, the combination of slow repayments and elevated, if no longer growing, levels of new borrowing will likely fuel further increases in outstanding debt.”

High default rate
There are multiple reasons why the debt levels are not going down.

One is that many borrowers are taking advantage of repayment plans based on borrowers’ incomes, along with some opting for longer repayment options.

Presidential candidates, particularly on the Democratic side, have made reducing or eliminating student debt cornerstones of their campaigns. Moody’s said those kinds of proposals “would stimulate the US economy but have negative effects for some financial institutions.”

In the meantime, the burden of student loans continues to be felt with an 11% default rate that is the highest of any debt category. Education also is now second only to mortgages as the highest form of debt for all Americans.

“Increased reliance on student debt crowds out an individual’s access to other forms of household credit, which likely delays business formation and homeownership, important drivers of economic growth and wealth creation,” Shenn wrote.