Survey Warns of Student Debt “Default Cliff”

A new survey of federal student loan borrowers by the Institute for College Access and Success, a nonprofit focused on college affordability, found that about a fifth of borrowers are currently in either delinquency or default.

“These findings bring even greater urgency to ongoing concerns about a looming ‘default cliff,’ where an unprecedented number of borrowers struggle so much to repay their loans that they default on their payments in droves,” Michele Zampini, TICAS’s associate vice president for federal policy and advocacy, wrote in a blog post.

The Department of Education itself acknowledged a potential default cliff in an August data release, Zampini noted, writing that, although no new borrowers had defaulted since payments were paused in March 2020, many delinquent borrowers were in danger of defaulting after that pause ended.

Zampini also wrote that student loan default “comes with severe and punitive consequences.”

Just over half of respondents (52 percent) said their debt has negatively affected their ability to save for retirement, and 45 percent said the same about their ability to find and afford housing. Slightly fewer participants said that their student loan debt was “worth it”—41 percent—than said it wasn’t, at 48 percent. Advanced degree holders were more likely to consider their debt “worth it” than those with an associate or bachelor’s degree, as were male borrowers compared to female borrowers.