Fewer People Are Behind on Their Private Student Loans

Any good news about student loans is sure to raise an eyebrow or two. After all, there aren’t a lot of good things to say about something that’s weighing on Americans’ finances and breaking records like an athlete hopped up on performance-enhancing drugs.

Despite that, there seems to be something positive happening in the world of private student loans. According to a new report, fewer borrowers are falling behind on their loan payments, which suggests they are better able to handle their education debt than they were a few years ago.

The report comes from MeasureOne Private Student Loan Consortium, which includes the six largest holders and lenders of education debt: Citizens Bank, Discover, Navient, PNC, Sallie Mae and Wells Fargo. Their portfolios make up more than 65% of private education lending in the U.S., according to MeasureOne’s website.

Private student loan delinquency and charge-off rates are at their lowest since before the financial crisis, the report says, and a smaller share of borrowers have put their loans into a state of forbearance.

The report focuses on data from the first quarter of 2016 and how it compares to first-quarter data from previous years. It does not include consolidation loans.

Here are some standout figures:

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There was a 16.8% decline from last year in the late-stage delinquency rate (loans more than 90 days past due).
The early stage delinquency rate (loans 30 to 89 days past due) is down 9% from last year.
2.2% of loans were in forbearance, which is a 4.1% decline from the same time last year and down 26.6% over the last 5 years.
Charge-offs made up 2.3% of loans in the first quarter, down from 5.1% five years ago. That’s a 54.5% decline. (A lender charges off a loan when it does not expect to get the money back from the borrower. That’s generally when a loan is sold to a debt collector.)

It’s important to note that private student loans only make up a very small portion of the more than $1.35 trillion in outstanding student loan debt in the U.S. (about 7.5%, or $102 billion, according to the report).

Still, the repayment improvement among this subset of student loan debtors is noteworthy. Private student loans generally don’t offer a lot of flexibility to borrowers who may have trouble affording their payments, which can make them even harder to repay than federal student loans. (In addition to forbearance, federal student loan borrowers can look into repayment options like deferment, income-based repayment or student loan forgiveness.)

Paying Back Your Student Loans

Struggling to make student loan payments can be really problematic, considering how missing any loan payment, education or otherwise, can have a seriously negative effect on your credit score, and a bad credit score can lead to all sorts of financial obstacles.

On top of that, the vast majority of private student loan borrowers need a co-signer to get these loans, meaning the missed payments affect not just the primary borrower (presumably the student) but also the person who helped get the loan. That’s often a parent or close family member. (You can see how student loans affect your credit by getting two free credit scores and regular updates on Credit.com.)

Since student loans can be very difficult to discharge in bankruptcy (though it’s possible), that makes it even more important to find a way to manage them, whether that’s looking into some sort of repayment plan or student loan consolidation.

If you have questions about your repayment options, start by talking to your student loan servicer. You can also share your questions on student loans in the comments.