Data released by the U.S. Department of Education indicates that despite a rise in the number of people enrolling in the government's student loan repayment plans, more people are defaulting on their federal loans.
As of Sept. 30, approximately 7.6 million people hadn’t made a student loan debt payment in at least nine months, a 7% jump over the same period a year earlier, according to the Education Department.
The amount of people with loans transferred to collection agencies or debt management has more than doubled in the fiscal year ending in September, climbing from 60,000 to 140,000 people, according to Education Department data.
Many experts are questioning whether student loan servicers, those who collect and apply payments, are doing enough to keep borrowers current. Researchers at the General Accountability Office believe a gap between participation in income-based plans and eligibility indicate borrowers aren't receiving sufficient information.
Servicers are paid millions of dollars by the federal government to essentially help people avoid defaulting on their loans, but the GAO found that even when they reach out to delinquent borrowers the information is often inconsistent. While servicers make information about income-driven plans available through customer service representatives and websites, researchers believe borrowers have to actively seek it out.
Federal loan portfolio defaults have been climbing for several quarters. Meanwhile, the federal government has given people more options for repaying loans - including expanding programs that cap monthly payments to a percentage of earnings, known as income-based repayment plans. Marketing campaigns and direct outreach by the Education Department led to higher enrollment in the last year but the amount of people severely behind on their debt remains high.
Student debt is nearing $1.3 trillion.There are 180,000 additional borrowers more than three months late on their payments compared to last year.
While defaults are rising, there’s some evidence that the government's push to get people into one of its repayment plans could be contributing to a lower rate of delinquencies in the first month of repayment.
The rate of delinquent payments of 31 days or more has fallen from 24% in September 2014 to 21.7% this September, according to the Education Department. The number of people enrolled in income-based repayment plans during that time increased 50% to more than 4.2 million.
Rohit Chopra, a senior fellow at the Center for American Progress, said that while a rise in borrowers who are more than 90 days late is troubling, the reduction in early-stage delinquencies is "hopefully a sign that the situation is getting better."