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The Daily Cardinal Est. 1892
Wednesday, February 21, 2024
 Experts warn that unsustainable student borrowing is reaching crisis levels across the country. Default rates at UW-Madison have actually fallen over the past year.

 Experts warn that unsustainable student borrowing is reaching crisis levels across the country. Default rates at UW-Madison have actually fallen over the past year.

Student loan default rates reaching ‘crisis’ levels

This generation of college graduates will include more borrowers than ever who may not be able to repay their student loans, according to a report by Bloomberg News Wednesday.

In the midst of nationwide economic upturn and unemployment rates that have been falling since the Great Recession, federal student loan holders are the only borrower group that have seen increased cumulative growth, the analysts said.

“There’s a systemic problem in the student loan market that doesn’t exist in the other asset classes,” said John Hupalo, founder and chief executive officer of Invite Education, an education financial planner. “Students need to get a job that allows them to pay off their debt. The delinquency rate will rise as long as students aren’t graduating with degrees that pay back that cost.”

At UW-Madison, student borrowing totals in at less than the national rate. A report published last February showed that half of UW-Madison students graduated with no debt at all. The 2017 default rate at UW-Madison was 3.3 percent, roughly a quarter of what it is at the national level.

Nationally, student loan debt currently has the highest 90+ day delinquency rate of all household debt, with more than one in 10 borrowers at least 90 days late. For comparison, mortgages and auto loans have a 1.1 percent and 4 percent delinquency rate, respectively, according to Bloomberg Global Data.

Students attending for-profit universities and community colleges represented almost half of all borrowers leaving school and beginning to repay loans in 2011. They also accounted for 70 percent of all defaults.

“Students aren’t only facing increasing costs of college tuition; they’re facing increasing costs of borrowing to afford that degree,” Hupalo said. “That double whammy doesn’t bode well for students paying off loans.”

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