Is America’s Increased Focus on Student Loans “Working?”

 Employer Insights

Student loans have generated a lot of buzz and a few major legislative changes in the past year, but is America’s increased focus on student loan debt paying off?

Recently, the higher education analytics experts at MeasureOne released a new report, which when combined with the US Department of Education stats, offers some surprising reality checks about America’s student debt situation.

Here’s an update on what late 2016 numbers showed about America’s student debt picture.

1. Private loans are being paid (more often) on time

MeasureOne’s look at school-certified private loans, not including consolidated loans, showed 2016 brought with it a decrease in late and missed payments for private student loans. The decrease here can be correlated with increased enrollment in the government’s repayment plans, for example enrollment in income-driven plans has increased 140 percent since December 2013.

The attempts to promote good repayment behavior on the federal side could be benefiting private lenders and refinancers when it comes to payments.

2. Loan balances are still pushing to a new all-time high

While more individuals are paying their private loans on-time, private student loan balances, along with their federal counterparts, are still growing rapidly. A bird’s-eye view of MeasureOne’s data shows that despite the payment progress, the country’s outstanding private student loan balance still increased to $102 billion, an increase of 0.8 percent.

In addition, the country’s Federal student loan balance also increased from 2015 to 2016, rising 1.17% from $1.2 trillion to over $1.4 trillion, according to Federal Reserve data from MarketWatch.

3. Delayed payments are down

Similar to delinquency, forbearance has also been on the decline. Forbearance occurs when borrowers can’t make scheduled payments and their loan servicer allows them to stop making payments or reduce the monthly payment for up to 12 months.

Year over year, the percent of loans in forbearance status declined 1.5 percent now resting at 2.2 percent. According to MeasureOne’s Q3 2016 Private Student Loan Report, the number of loans in forbearance has been under 3% from for the last four years and currently totals $1.4 billion in debt.

4. Missed payments are a big(ger) problem for federal student loans

Recent data released from the US Department Education showed that loan delinquency is a much bigger problem than previously thought for federal loans. The data report recently highlighted by the Wall Street journal showed that about one fourth, or 25 percent, of all federal loan borrowers had not paid at least $1 in the past seven years. Given the fact that  approximately 90 percent of student loans are federal loans, this indicates a much bigger issue for working Americans and the companies that employ them.

Why companies should care – the ugly truth

From turnover to productivity, there are list of serious reasons companies need to be concerned about the trend is in missed payments.

The bottom line reasons are that these missed trends affect productivity, employee wellness, and ultimately contribute to the financial stress that creates major hurdles for teams looking to engage and keep their highest value talent.

The truth here is that, while the increased focus on student loans is helping fuel positive change in some ways, most individuals still need help with today’s biggest financial hurdle.

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To learn how your company can help with today’s student loan problem, contact us below.

Ryan Gardner