How Likely Are You to Default on Student Loan Debt?
A new interactive map shows default rates for U.S. borrowers by state.
In case you’ve missed it, student loan debt is a big problem in the U.S. – a $1.3 trillion problem, according to the national student debt clock on MarketWatch. People in the U.S. add $2,726 in student loan debt every second of every day that passes. As of 2009, student loans were already the second largest source of debt for most Americans, trailing only mortgages. But at least with a mortgage at least you have an asset to show for what you owe.
Now, the new interactive map you see above from puts a visual view on where borrowers struggle the most to pay back their loans. The map designer, NewsroomJake, uses data from 2012-2013 schoolyear graduates.
By far, New Mexico borrowers seem to have the most trouble with repaying their loans. At an 18.9% default rate, it effectively means almost one out of every five borrowers is currently facing default. West Virginian residents aren’t far behind at a 16.2% default rate.
Still, even more troubling are the states at the lower end of the spectrum. Even there, default rates are high. Most of the upper northeast states have default rates of less than 10% and Massachusetts student loan borrowers only have a default rate of 6.2%. However, when you compare that with national default rate on other types of debt, it shows just how devastating student loan debt has the potential to be.
- As of the second quarter of 2016, mortgage default rates sat at 4.55%
- As of the first quarter of 2015, the charge-off rate for credit cards from the top 100 banks sat at 3.03
- Even the credit card delinquency rate measured by credit card balances that are more than 90 days late was only 8.38% by the first quarter of 2015
“Student loans are quickly becoming the problem child of the debt world,” says Gary Herman, President of Consolidated Credit. “Even high interest credit card debts are causing problems for fewer Americans. The good news is that unlike credit card debt, the federal government offers specialized solutions that can help many borrowers pull their debts out of default faster or with less credit damage than they would be able to with other types of debt.”
Two fixes for student loans in default
Recognizing that borrowers may be overburdened by debt taken on to obtain a higher education, the federal government makes a few special options for bringing federal student loan debt out of default that you don’t see with other types of debt. One method minimizes the credit damage caused by default, while the other provides a fast and easy way to pull loans out of default.
- Default solution that removes negative credit report information.
- For federal student loans, borrowers have a one-time opportunity to arrange a “reasonable and affordable” repayment plan with each loan servicer.
- Once you agree on the plan, you have to make 9 payments on time.
- Following those 9 payments, your loans are brought current and the default information is removed from your credit report as if the default never happened.
- On Direct and FFEL loans, you can miss one payment but have to make 9 payments out of 10; with Perkins loans, the 9 payments must be consecutive, so you can’t be late any month.
- Default solution that brings your loans current immediately.
- If defaults are preventing you from using federal repayment plans and forgiveness or they’re affecting your Financial Aid eligibility, then you may want a solution that moves a little faster.
- If you have at least one Direct or FFEL loan among your student loans, you can consolidate almost any federal student loan debt using a Direct Consolidation Loan.
- Once you get approved for the Direct Consolidation Loan, it brings any defaulted debt current immediately and you can qualify for other programs.
- However it does not remove the default notice from your credit report.
For more information about federal student loan consolidation, visit Consolidated Credit’s Student Debt Consolidation Guide.