The Education Department released data this week showing that student loan defaults have reached a record high. Some 8 million people have not made a payment on their student loans for at least nine months, which is the definition of the loan being in default. The amount in default rose to a record $128 billion, an increase of 8% from last year.
The number of borrowers has doubled in the past 10 years
The number of student loan borrowers has double in the past ten years to 43 million current borrowers. The total student loan debt now stands at $1.3 trillion. The amount of total debt has doubled in the past eight years, and some are concerned that it could represent the next financial crises.
The Obama administration has expanded programs that cap the monthly payment based on income which has encouraged more borrowers to make payments. By this summer, there were 5.3 million people enrolled in these programs. While that number represents only about 12% of total borrowers, it accounts for a year over year increase of 36%.
Average debt of 2016 graduates was more than $37,000
Still, for many borrowers, the amount of debt appears unmanageable, and they find it easier to default on their payments than continue payments that only marginally reduce their debt load.
"The average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year." — Student Loan Hero
Student loan debt has been a major topic in the 2016 campaign. Hillary Clinton has proposed eliminating tuition for every student from a family making less than $85,000 a year as a way resolve the long-term problem. She would use executive action to place a three-month moratorium on loan payments to allow borrowers to refinance their debts at more favorable rates.
Federal government profits from student loans
Donald Trump has pointed out that the federal government makes money off student loans and has indicated he would favor reducing the amount of interest the government charges on the student loans it underwrites. Elisabeth Warren has also said that the federal government makes a profit on student loans.
"How much profit? Well, let me just give you a little slice of the loans, where we've got particularly good data. The loans that were put out between 2007 and 2012 -- that cohort of loans -- is on target right now to produce $66 billion in profits for the United States government." — Sen. Elisabeth Warren
The other side of the equation is the rising cost of college education. Between 2004 and 2014, the average cost annual cost of attending an undergraduate public university increased 34 percent.