Can America Repay Its Student Loans?

More than 40% of borrowers are behind and only 10% of students feel prepared to repay.

Student loan debt is definitely an issue in the U.S. but two new reports that came out this month show just how big that issue may potentially be. The first report from the Wall Street Journal shows 43% of the 22 million Americans who have student debt to repay were not making payments as of January 1 of this year. Additionally, of the almost 9.5 million Americans who are behind on their loan payments, 3.6 million are fully in default.

The second troubling statistic comes from the Money Matters on Campus report from EverFi. While this report focuses on more than just student loans – looking at the financial behaviors of two-year and four-year college students – there is one statistic that stands out.

“Across all respondents, only 1 in 10 students feel prepared to pay off their college loans.”

If that’s true, the situation with student loan repayment isn’t likely to improve anytime in the near future. This trend is also creating a new phenomenon where borrowers are delaying major life events because they’re still burdened by student loan debt. From buying a first home to getting married to having kids, people are pushing back life plans because they already have too much debt to be financially stable enough to make these major moves.

According to Money Matters on Campus, the top needs for students facing loan repayment focus on easier access to account information and improved understanding of repayment options. So while the federal government has developed a range of student loan consolidation options to provide relief to federal loan holders, these programs may be underutilized due to a simple lack of understanding on the part of consumers.

“It’s the same challenge we see with federal mortgage lending relief programs like HAMP,” says Gary Herman. “These programs exist to provide relief to struggling borrowers, but people haven’t been given enough information yet to take advantage and often these programs even get confused with scams so people simply shy away from using them at all.”

Herman explains this kind of uncertainty is what makes certified financial counseling services so invaluable. An impartial third-party whose versed in all of the federal, state and local relief options that may be available can help consumers navigate processes that are often complex and confusing.

“You’re talking to a certified professional who knows exactly what relief options are available and what you need to avoid,” Herman affirms. “They can assess your situation and tell you, ‘This is the best option for solving your debt problems given your specific financial situation. Even better, most of certified counseling services offer free consultations up front, so you have little to lose to get the professional opinion you need to move forward.”