Consumer Financial Protection Bureau

New Data: More Than 1.1 Million Federal Student Loan Defaults in 2016

Largest Student Loan Servicer, Navient, Lags in Affordable Repayment Plan Sign-Ups

Washington, D.C. – Analysis of new data released by the U.S. Department of Education reveals millions of Americans are in default on Federal Direct Loans serviced by companies hired by the federal government.

“3,000 preventable student loan defaults each day in America is 3,000 too many.” said Rohit Chopra, Senior Fellow at the Consumer Federation of America and formerly the Consumer Financial Protection Bureau’s Student Loan Ombudsman. “Our broken system works well for the student loan industry, but is failing borrowers, taxpayers, and our economy.”

As of the end of 2016, 42.4 million Americans owed $1.3 trillion in federal student loans. These figures exclude borrowing through private student loans, credit cards, and home equity loans to finance the growing costs of college. The Federal Reserve System puts total outstanding student loans at $1.4 trillion, which includes federal and private loans, but excludes other loans used to finance higher education.

Student loan servicers, the companies paid to collect payments, are responsible for enrolling borrowers in repayment plans to help them avoid default. For example, the Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) plans help to cap payments at roughly 10% of income, alleviating the burden of student debt.

Highlights of the Consumer Federation of America’s initial analysis of the recently-released Education Department data, as of December 31, 2016, include:

  • Average amount owed is $30,650 per federal student loan borrower. Average amount owed per borrower continues to tick up, rising 17% since the end of 2013, when borrowers owed on average of $26,300.
  • $137 billion in default. For federal loans originated by financial institutions (FFEL) and the US Department of Education (Direct), a total of $137.4 billion in balances were in default, a 14% increase from 2015. This cumulative level of defaulted balances includes loans which defaulted in previous years. Defaulting on a federal student loan comes with severe consequences. Borrowers can face seizure of their tax refund, garnishment of their wages, and an inability to pass employment verification checks.
  • 1 million Direct Loan defaults in 2016. In 2016, 1.1 million Federal Direct Loan borrowers defaulted. Federal law typically defines a federal student loan default as being 270 days past due. Borrowers defaulting for the first time slightly decreased compared to 2015, though borrowers re-defaulting slightly increased compared to 2015.
  • Data withheld for new defaults in bank-based student loan program. The Education Department did not release data on loans entering default in the bank-based FFEL program. The largest holder of these loans is Navient, with $87.7 billion in outstanding loans as of the end of 2016. “With more than 16 million Americans still on the hook for bank-based federal student loans, the cost of being kept in the dark is real,” said Chopra.
  • Total federal student loan portfolio increases $79.4 billion. Total outstanding federal student loans, including loans owned or guaranteed by the government, increased $79.4 billion in 2016, roughly the same as the $80.2 billion increase in 2015.
  • Navient lags in enrollment on new affordable repayment plans. The Education Department contracts with four major servicers to collect payments from borrowers on loans owned by the federal government. Of these servicers, Navient, formerly known as Sallie Mae, had the lowest percentage of borrowers enrolled in the PAYE and REPAYE plans among those in repayment, deferment, and forbearance. The Consumer Financial Protection Bureau, the Illinois Attorney General, and the Washington Attorney General recently sued Navient for misconduct related to student loan servicing and other violations.

AES/PHEAA had the highest levels of enrollment, though this is likely attributable to its status as the exclusive servicer for Public Service Loan Forgiveness. Borrowers generally benefit from this program only if they enroll in an affordable repayment plan.

 The full set of data is available on the Department of Education’s website in the Federal Student Aid Data Center.

Borrowers struggling with student loans should visit the Consumer Financial Protection Bureau’s Repay Student Debt tool, available here.

Contact: Rohit Chopra, 202-939-1018


The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy.