Over all, about seven million borrowers have defaulted on federal or private student loans, while about a third of federal direct-loan borrowers have sought to delay or lower their repayments, the bureau’s ombudsman, Rohit Chopra, wrote in a blog post on Monday.
The bureau’s analysis of data collected by the U.S. Department of Education also looks at the repayment-plan choices of some 15 million borrowers of federal direct loans. About two-thirds, or nearly 10 million, of those borrowers are in standard 10-year repayment plans. Of the remainder, 1.58 million are in income-based repayment programs, while 3.35 million are not repaying based on income, and about 230,000 are in other alternative repayment plans.
The high number of defaults, Mr. Chopra wrote, is cause for alarm. “Defaulting on a federal student loan has serious consequences,” he said. “Unlike other consumer credit, borrowers in default on a federal student loan might see their tax refund taken and their wages garnished without a court order.”
Many of those defaults could have been avoided, he wrote, if borrowers had been aware of and able to easily enroll in an income-based repayment plan.