Answer (from Consumer Federation analysis reported by CNBC): In 2016, more than 4.2 million out of 42.4 million borrowers were in default. This is a 1.1 million student increase from 2015.  Default is a condition where the borrower has not made a payment on their loan for 9 months.

What makes this more troubling is that these increases in defaults are occurring at a time when the economic statistics, especially unemployment rates are at historical lows (from Washington Post): 

“Despite a rising stock market and falling unemployment [rate], student loan borrowers are still struggling,” said Rohit Chopra, a senior fellow at CFA and a former student loan ombudsman at the Consumer Financial Protection Bureau. “The economy remains very difficult for so many young people just starting out.”

The next question your students might ask is “why do students default on their loans?” #1 reason: They don’t finish college!

“We don’t have a student loan problem, we have a college completion problem,” said Mark Kantrowitz [NGPF podcast guest], vice president of strategy for college and scholarship search site Cappex.com. “Students who drop out of college are four times more likely to default on their loans.”

Here’s a quick webquest which might surprise your students: Ask them to do online research to find out what the average balance is for those students who default on their loans.

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NGPF has activities geared towards preventing student loan defaults by having students grapple with this issue BEFORE they take on debt. Here are a few:

• Calculate: How Much Should I Borrow for College? 
• Analyze: Student Loan Debt Crisis
• Data Crunch: What Percentage of College Students Graduate With Debt?

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.