These 3 Groups Are Most Likely to Default on Student Loans

Sara Lindberg Updated on May 6, 2019

If you're currently wrestling with student loan debt, you’re not alone. A study done by Brookings Institution found that two in five borrowers are likely to default on their student loans within five years.

But before you go into panic mode, let's talk about what those survey results really mean and discuss ways you can avoid becoming a statistic. 

Girl looking at city-521955-edited-661128-edited

Who is most likely to default?

Three groups of student borrowers stood out in the study:

  1. Students did complete their degree
  2. Students with smaller debts, and
  3. Students who took out loans to attend for-profit institutions. 

Lets talk about what that means to you.

Students who never completed a degree

Paying on a student loan that didn't result in a degree is a tough pill to swallow—you probably have debt to pay without the salary you were expecting.

If this is you, you might want to consider revisiting your educational goals. There are two good reasons for this: you'll have an opportunity to raise your income, and you can defer your federal student loans as long you maintain part-time status. 

Focus on going to a local, less-expensive school, such as a community college. Meet with an adviser to find out what credits you've already earned that you can transfer over. Be sure to have a concrete plan for which classes you should take every semester to complete your degree. 

Students with smaller debts

If you consider yourself safe from default because you only borrowed a small amount, you might want to take a look at your current situation. The study found that default rates depend more on student and institutional factors than on average levels of debt.

Just because you didn't borrow as much as your friend doesn't mean you're safe from defaulting on your student loan. Even if your loan is smaller, make sure you're still being proactive about paying it off. 

Students who took out a loan to attend a for-profit college

The cost of attendance for a for-profit college or technical college is often high compared to the amount of time you're there.

This causes some students to borrow more than they would if they went to a public two-year college.

Imagine Life Without a Student Loan Payment... Start Saving Now!

How to avoid default on your student loan

While the study paints a scary picture, especially if you are in one of the high-risk groups, there are things you can do to avoid becoming a statistic.

Refinance your student loan

When you refinance your private or federal student loans, you can save money over the life of the loan.

By swapping out your existing loan for a new one with a lower interest rate, you can lower your monthly payment, lengthen the term of your loan to lower your monthly payment even more, or pay off your loan faster. 

See also: Everything You Need to Know About Student Loan Refinancing

Consolidate your student loans

Consolidation is a way to join multiple monthly loan payments into one.

When you consolidate through a federal Direct Consolidation Loan, you may be eligible for a lower monthly payment since this extends the life of your debt. Even though you will be paying off your debt for a longer period of time, your monthly payments will be lower—and hopefully easier to keep up with.

Consolidating through a private lender can lower your interest rate to lower monthly payments or allow you to save money over the life of your loan.

See also: Should I Consolidate My Student Loans?

Explore income-based repayment 

If you have federal loans, you may be eligible for an income-driven repayment plan.

These repayment plans allow you to cap your monthly payment at an amount that is based on your income and family size—generally 10% of your discretionary income.

See also: Beginners' Guide to Income-Driven Repayment Plans

Apply for forbearance

Forbearance is the temporary relief from your obligation to make payments on your federal student loans. Your lender may grant you a forbearance if you’re facing a financial hardship, such as a serious medical issue that leaves you unable to work.

However, keep in mind that since interest still accrues while your loan is on hold, so this should be your last resort. 

See also: What Is Federal Student Loan Forbearance?

Find out how much you could save by refinancing your student loans

Published in: Refinance

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg

Refinance and Save Today With These Lenders

#1 - Nitro Recommended View More Details

Special offers for medical resident and fellow refinance products

  • Fixed rates: 2.49% - 6.31% APR
  • Variable rates: 1.88% - 6.15% APR
  • Minimum credit: 650
View More Details
Visit Splash View Loan Disclosure

Splash Financial is a leader in student loan refinancing with new rates as low as 2.49% fixed APR which can save you tens of thousands of dollars over the life of your loans. No application or origination fees and no prepayment penalties. Splash Financial is in all 50 states and is intensely focused on customer service. Splash Financial is also one of the few companies that offers a great medical resident and fellow refinance product. You can check your rate with Splash in just minutes.

  • Low interest rates – especially for graduate students
  • No application or origination fees. No prepayment penalties.
  • Co-signer release program - you can apply for a cosigner release form your loan after 12 months of on-time payments
  • Specialty product for doctors in training with low monthly payment

Click here to see more of Splash's offerings and to see how you can save money.

#2 View More Details

For every loan they fund, they contribute to the education of a child in need

  • Fixed rates: 2.83% - 6.74% APR
  • Variable rates: 1.99% - 6.84% APR
  • Minimum credit: 660
View More Details
Visit CommonBond View Loan Disclosure

CommonBond was founded in 2011 by three MBA graduates from the University of Pennsylvania’s Wharton School who wanted to help their peers escape from high-interest student loan debt. Its original focus was on grad students, but it has since expanded to cover undergrads as well.

Of all the companies we reviewed, CommonBond has some of the best customer service. The company prides itself on being easy to reach by email, phone, or live chat. It offers networking events, expert panels, insider newsletters, and even has a program help borrowers who lose their jobs to find new ones. CommonBond also makes you feel good about choosing to refinance with them by donating money to an education nonprofit for each loan they write.

CommonBond Student Loan Refinance review

  • Unemployment protections - If you lose your job or decide to go back to school, you can delay your payments for up to 24 months.
  • Social promise - For every loan they fund, they also contribute to the education of a child in need.
  • Hybrid loan option - Offerings include a 10-year hybrid loan with fixed interest for the first five years, and variable interest for the final five.
  • Referral bonus - For every friend you refer who refinances their loans with CommonBond, you’ll earn a $200 cash bonus.
  • Qualification - Borrowers must have graduated at least 2 years prior if they want to apply without a co-signer. And borrowers in 6 states – Idaho, Louisiana, Mississippi, Nevada, South Dakota, and Vermont – cannot currently refinance through CommonBond.

Get a personalized review of your refinancing options with CommonBond today.

#3 View More Details

SoFi is the leading student loan refinancing provider. 

  • Fixed rates: 2.49% - 6.94% APR
  • Variable rates: 2.25% - 6.59% APR
  • Minimum credit: 650
View More Details
Visit SoFi View Loan Disclosure

$30 billion+ in refinanced student loans. SoFi has some of the lowest interest rates and, unlike the other lenders we reviewed, there's no maximum on the amount you can finance. Some state restrictions may apply.

  • Serious savings: Save thousands of dollars thanks to flexible terms and low fixed or variable rates.
  • No hidden fees, no catch: No application or origination fees. No pre-payment penalties.
  • Fast, easy, and all online: Simple online application and access to live customer support 7 days a week.
  • Access to member benefits: SoFi members get career coaching, financial advice, and more—all at no cost.
  • 98% of surveyed members would recommend SoFi to a friend

Save thousands on your student loans and pay off your loans sooner. Find your rate.

#4 View More Details

Ability to apply for cosigner release after 24 consecutive payments. 

View More Details
Visit NelNetBank View Loan Disclosure

Give Your Life’s Journey a Jump-Start.

If you’re ready to put student loans in your rearview mirror, Nelnet Bank student loan refinancing offers low rates and flexible terms to help you start getting ahead.

  • VARIABLE RATES: 1.95% - 5.62% APR See Disclaimer
  • FIXED RATES: 2.48% - 6.62% APR See Disclaimer
  • AUTO DEBIT SAVINGS: We’ll knock .25% off of your interest rate when you enroll in auto debit. See Disclaimer
  • NO ORIGINATION FEES: No application, origination, or prepayment fees on Nelnet Bank loans.
  • HARDSHIP PROTECTION: Hardship forbearance helps protect against unexpected loss of income. See Disclaimer

See How Much You Can Save: Estimate your savings with a student loan refinance from Nelnet Bank.

#5 View More Details

Works with 300+ community lenders for higher approval chances

  • Fixed rates: 2.95% - 7.63% APR
  • Variable rates: 1.90% - 5.25% APR
  • Minimum credit: 660
View More Details
Visit LendKey View Loan Disclosure

Connecting student borrowers to a network of over 300 community lenders with low interest rates. By partnering with these lenders, LendKey is able to give consumers direct access to the best rates available from the most borrower friendly institutions. As the servicer of all loans obtained through its platform, you can rest easy knowing your personal information will be safe and that the best customer service team will be ready to answer your questions from application until your final payment.

LendKey Student Loan Refinance review

  • Lightning fast rate check - 2-minute rate check with no impact on your credit score
  • More lenders, more options - see the best offers from over 300+ community lenders for higher approval chances
  • Life of loan relationship - With LendKey, your personal information will never be sent or passed on to third parties. Their customer service team is with you from the moment you land on their website until you've completely repaid your loan.
  • Unmatched benefits- Community lenders put people over profits and offer unique benefits like cosigner release after 12 on-time payments, interest only repayment options to keep monthly payments low, the largest unemployment protection period in the market, and more.

Get a personalized quote from LendKey now.

#6 View More Details

Best for borrowers who want to customize their repayment schedule to pay off debt fast.

View More Details
Visit Earnest View Loan Disclosure

Using technology, data, and design to build affordable products, Earnest's lending products are built for a new generation seeking to reach life's milestones. The company understands every applicant's unique financial story to offer the lowest possible rates and radically flexible loan options for living life.

  • Commitment-free 2 minute rate check
  • Client Happiness can be reached via in app messaging, email, and phone 
  • No fees for origination, prepayment, or loan disbursement
  • Flexible terms let you pick your exact monthly payment or switch between fixed and variable rates
  • Skip a payment and make it up later
  • Online dashboard is designed to make it easy to apply for and manage your loan

Click here to apply with Earnest and to see how much you can save.

#7 View More Details

16 different loan term options – more flexibility to pay down your loan faster

  • Fixed rates: 3.24% - 5.54% APR
  • Variable rates: 3.34% - 5.69% APR
  • Minimum credit: 680
View More Details
Visit CollegeAve View Loan Disclosure

College Ave Student Loans offers major help and minor stress. We’ll help guide you through the process to find the right loan term and interest rate for you and the family budget.

  • Fast rate check: Get your new rate in 60 seconds 
  • Instant credit decision
  • Super flexible terms: 16 loan terms available from 5 to 20 years
  • No fees to apply

Click here to see more College Ave offerings and to start saving today! 


I reduced my student loan payment by $152 per month, by refinancing thru Nitro:

Save Money Now