2 out of 3 Student Loan Borrowers Are Struggling

Last Updated Mar 24, 2011 10:32 AM EDT

Here is the ugly side of runaway college costs: A frightening number of student loan borrowers can't repay their federal college debt on time.

According to a new report by the Institute for Higher Education Policy, nearly two out of five student loan borrowers were delinquent on their payments at some time during their first five years of repayment. To be considered delinquent, a borrower's payments must be 60 days late.

Actually, the news is even grimmer than that. To avoid delinquency, nearly a quarter of borrowers legally postponed their payments.

Here, however, is the reality that I found most shocking: Only 37% of borrowers, who began repaying their federal student loans in 2005, have managed to make timely payments without getting into trouble. That means nearly two out of every three borrowers have been struggling!

The statistics are even more disturbing because students are increasingly borrowing to pay for college. About two-thirds of students are borrowing for college and they are graduating with an average college debt of $24,000. According to Mark Kantrowitz, publisher of FinAid, student loan debt, roughly $896 billion, now exceeds the nation's credit card debt.

The report, Delinquency: The Untold Story of Student Loan Borrowing, uncovered these severe problems in the student loan world:
  • Borrowers don't understand loan terms.
  • They rarely know what their repayment options are.
  • They aren't aware of the options that would help them manage their loans.
Before students leave college, they need to understand how to manage their college debt. They can start by reading a blog post that I wrote a few months ago:

5 Student Loan Repayment Tips

I also recommend that they take a look at a helpful student loan cheat sheet that Mark Kantrowitz developed at FastWeb, the scholarship search engine.

Lynn O'Shaughnessy is author of The College Solution and she also writes a college blog for The College Solution.

More on CBS MoneyWatch:

8 Ways to Wipe Out Your Student Debt
Best Way to Pay Student Loans
Who Borrows the Most for College?

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