Students graduate, but loans stay on...

Student loans: More college graduates are delinquent on repaying student loans - chicagotribune.com: "The study conducted by the nonprofit Institute of Higher Education Policy sheds light on a segment of the borrowing population that is usually ignored — and it is a large portion. Among all students borrowing to pay for their education, 1 in 4 is having trouble making full monthly payments, the study said.

'We talk endlessly about default rates and what that means for colleges, but not about delinquency,' said Alisa Cunningham, coauthor of the report. 'It's a really big problem, and I'm not sure that anybody really knew the extent of it.'

Borrowers are delinquent when they are behind on payments, which can affect their ability to get a good rate on any future loan, including auto loans and mortgages, and will affect their credit reports.

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The number of college graduates with debt increased from less than half in 1993 to two-thirds in 2008, according to the Education Department. And the average debt is going up sharply — to $23,200 in 2008 from $18,650 four years earlier.

If they don't catch up with payments, usually after nine months for federal loans, delinquent borrowers default. That makes them ineligible for new loans or grants, and the government can seize their tax refunds, garnish their wages, withhold public benefits such as Social Security or charge significant collection fees.

The study found that 26% of nearly 1.8 million borrowers surveyed had been delinquent on their loans but hadn't defaulted. In addition, 15% of borrowers had defaulted.

Cunningham said lack of knowledge might be a factor in why so many student loan borrowers experience delinquency at some point.

"I was surprised at the fact that a lot of these borrowers actually had never heard of things like forbearance or deference — especially since they're supposed to go through an educational process during college," Cunningham said, naming two methods for legally postponing payments.

Part of the task of educating borrowers falls to guaranty agencies. These are groups that once insured student loans, but now focus on education and advocacy. They also work to collect on and rehabilitate defaulted loans.

"Many borrowers end up becoming delinquent or defaulting because they don't know all of the options available to them," said Debra Chromy, vice president of government services at nonprofit guaranty agency American Student Assistance.

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