Proposals, Surveys, and Default Rates – This Week in Student Loan News

Published on Author Kelsey Radcliffe

This week in student loan news, we learn the details of Clinton’s proposed student loan reform, a new survey reveals the reasons some borrowers aren’t refinancing their student loans, and borrowers who default the most aren’t necessarily those with the largest balances.

Clinton’s Proposed Student Loan Reform

In an effort to reduce the $1.3 trillion burden of student loan debt that Americans face, Democratic presidential candidate Hillary Clinton has released her plans for student loan reform. Her proposed plan includes steps to provide graduates with relief from debt along with helping future students attend public universities debt-free if their household income falls under a certain threshold.

Clinton’s debt relief plan would allow everyone with federal loans to defer payments for 3 months while providing borrowers with information and resources to save money on their loans. Refinancing options for federal loans, simplified and expanded options for income-based repayment, and 3-year interest-free deferment for borrowers starting businesses are some of her proposed solutions. Clinton also promises to push employers to contribute to student debt repayment.

Read the full story here.

Survey Gives Insight on Attitudes Toward Refinancing

A recent survey from our partners at Student Loan Hero has revealed some of the attitudes borrowers have toward student loan refinancing, how well they understand the process, whether or not they have refinanced, and if not, what’s stopping them.

According to the survey, only 62% of those with student loans were familiar with the concept of student loan refinancing. Most borrowers surveyed who hadn’t refinanced said they chose not to do so in order to remain on income-based repayment or receive other federal loan benefits, like loan forgiveness.

Of those who had refinanced, 26% did so to lower their monthly payments, while 33% wanted to lower their interest rate. The most common reason our borrowers refinance with us is to lower their interest rate. Other benefits of refinancing include cosigner release, transferring a parent PLUS loan to a child, or switching from a variable rate to a fixed rate, but under 3% of borrowers refinanced mainly for these reasons.

When directly asked if they would be willing to give up access to federal benefits in exchange for a lower interest rate, 36% of borrowers said no, while 39% said they weren’t sure.

Read the full story here.

The Student Loan Problem That Nobody Talks About

Borrowers who struggle the most to repay their student loan debt aren’t necessarily the ones with the largest debt burdens. According to a recent study published by the Financial Industry Regulatory Authority (FINRA), 28% of Americans with student loans didn’t finish school. Those borrowers have the greatest challenge in repaying their education debt – more than half said they were late at least once on a student loan payment, compared to 38% of borrowers who did graduate.

Another survey from the Federal Reserve Board of Governors reports roughly 25% of borrowers with “some college” or a technical degree are behind on their loan payments, compared to 12% of those with a bachelor’s degree or 7% with a graduate degree.

The survey also revealed that those with smaller amounts of debt have the most problems paying the debt back, which makes sense given that a low balance could mean that the student didn’t complete school. “More than 20% of borrowers with $10,000 or less in debt are behind on their payments compared with 17% of those with $10,000 to $25,000 and 11% of those with $100,000 or more in loans” the Fed survey found.

Read the full story here.

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