Smart Borrower Blog

Student Loan Defaults Could Reach 40% by 2023

Nov 7th, 2018 @ 11:22 AM by Amber Nelson

U.S. student loan borrowers are defaulting at such a steep rate that on the current trajectory as many as 40% of all borrowers could be in default within the next five years, according to a report
from the Urban Institute.

Student loans now make up the second-largest consumer debt category. Today there are more than 44 million student loan borrowers who owe a total of $1.5 trillion all together, according to personal finance site Make Lemonade. And of those, the Urbans Institute says, about 250,000 borrowers default on their loan commitments each quarter. And as the average loan per student grows year after year, those rates could increase. The average Class of 2016 graduate owes $37,000 in student loans, while the average 2017 grad owes $40,000. The Urban Institute report also found that it takes borrowers an average of 19.4 years to pay off their student loans.

One surprising finding from the report was that borrowers with smaller amounts of student loan debt actually were more likely to default on their loans than those with larger amounts. Roughly a third of borrowers who had a student loan balance of $5,000 or less defaulted at least once within four years, but only 15% of those who owed more than $35,000 defaulted within four years.
The report also found that certain types of other debt were predictors of which borrowers were most likely to default. Those student loan borrowers who were already in collections on things like utilities or retail or medical debt. Borrowers who had auto debt, mortgage debt, or even credit card debt, however, were less likely to default within four years.

The Urban Institute study concluded that policy makers should use the data to predict those borrowers at greatest risk for default and find ways to better prepare them to pay off their student loans on time.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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