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KEY TAKEAWAYS
- Although millions of student loan borrowers are behind on their payments, a quarter of borrowers are confident they will pay off their loans this year.
- Older borrowers are more pessimistic about their student loans, and more of them say they will never be free from their student debt.
- Since the Department of Education has resumed collections on defaulted loans in May, many borrowers say they are feeling the affects of that.
Millions of student loan borrowers have been making headlines lately as they struggle to keep up with their payments, but a surprising number of them say they expect to finish paying off their debt this year.
Out of roughly 42 million borrowers, more than 4 million were in late-stage delinquency last quarter — the highest number of student loan borrowers on the verge of default ever recorded by the Department of Education. Yet others feel optimistic about their debt, according to a recent survey by think tank Data for Progress. Nearly a quarter of those surveyed said they expect to pay off their student loans within the next year.
That notion tracks with comments from Barclays’ 23rd Annual Global Financial Services Conference yesterday, where Synchrony Financial CFO Brian Wenzel noted that consumers with student loans are keeping up with their credit card payments just as well as those without.
“We’re not seeing anything in our portfolio that indicates those who have student loans are performing worse than others,” Wenzel said.
However, older student loan borrowers are struggling with their payments more, making fewer on-time payments than their younger counterparts. Only 21% of borrowers over the age of 45 think they’ll finish paying off their student loan debt in the next year.
Additionally, almost two in every ten borrowers older than 45 said they don’t think they’ll ever pay off their student loan debt. Comparatively, only 5% of borrowers under 45 said they will never be free of student loans.
| When Borrowers Expect To Be Free of Their Student Debt | |||
|---|---|---|---|
| All Borrowers | Borrowers Under 45 | Borrowers 45 and Over | |
| Within the Next Year | 24% | 27% | 21% |
| 1-4 Years | 22% | 22% | 23% |
| 5-9 Years | 15% | 18% | 12% |
| 10-19 Years | 10% | 13% | 7% |
| 20+ Years | 5% | 5% | 4% |
| Never | 12% | 5% | 19% |
| Not Sure | 12% | 9% | 14% |
The Department of Education restarted payments for all borrowers earlier this year and resumed collections on defaulted loans in May. More than two-thirds of borrowers surveyed by Data for Progress said the resumption of collections has had some effect on their finances, and 18% said collections have had a significant impact.
Although a defaulted borrower will have their federal benefits or wages garnished by the government, many have had trouble resuming payments because constantly changing student loan policies make navigating the system harder. In the last quarter, data from the Department of Education shows almost 29 million student loan borrowers were late on their payments, and student debt was becoming more seriously delinquent than any other debt type, according to the New York Federal Reserve.
