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Student Loan Delinquency Rates Aren’t Getting Worse

Tuesday, April 21, 2015

The high levels of student loan debt have received considerable attention and are a constant focus of debate. A recent essay, published by the Federal Reserve Bank of St. Louis, illustrates that student loan delinquencies don’t appear to be rising.

Senior Economist Juan Sánchez and Research Associate Lijun Zhu, both with the St. Louis Fed, found that the share of student loan borrowers that are delinquent for 30 days or more increased from 11 percent to 17 percent over the period 2004-2012. Over the past two years, the rate has remained relatively stable. They wrote, “We conclude that the delinquency rates are high, but the evolution over the past 10 years seems less problematic.”

Sánchez and Zhu also examined the delinquency rates of student loan borrowers that were actually in repayment status.1 About 55 percent of student loans were in repayment in the fourth quarter of 2010, for example, while the delinquency rate was about 15 percent for all student loan borrowers. This implies a delinquency rate of 27.3 percent for borrowers with loans actually in repayment, which is much higher than for any other type of debt.

Over the past 10 years, the share of loans in repayment has risen from about 47 percent to reach 55 percent. In other words, the share of loans not in repayment decreased from 53 percent to 45 percent. Sánchez and Zhu concluded, “This decrease confirms our earlier indication that the trend in delinquency is not as problematic as it seems. Because more loans are in repayment, one would expect an increase in the delinquency rate measured as a ratio of all student loan borrowers.”

Notes and References

1 Typically, student loan payments aren’t required of borrowers who are still in college. These situations make up the bulk of the loans considered “not in repayment.” Other loans with “not in repayment” status include loans in deferment or forbearance. 

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