Guaranteed Student Loan Program Bankruptcies

HRD-77-83: Published: Apr 15, 1977. Publicly Released: Apr 15, 1977.

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Under the Guaranteed Student Loan program, loans are made to students by participating private lenders. These loans are insured by the U.S. Office of Education or by State or private nonprofit guarantee agencies which have reinsurance agreements with the Office. The Federal Government pays 100% of lender losses on default and bankruptcy claims on Office of Education insured loans, and reimburses State or nonprofit agencies for 80% of their payments to lenders. A random sample of 606 bankruptcy claims paid during the period July 1, 1975, through June 30, 1976, was studied.

Analysis of 541 of these cases showed the petitioners to have: average earnings of $6,678 for the year prior to filing bankruptcy; average total debts of $14,115, of which $4,138 were educational debts; and average assets of $4,454. The average guaranteed student loan was for $2,588, and the average claim paid to lenders was $2,292, indicating that little is being repaid on these loans. Other Federal and private loans averaging about $1,600 were included in the bankruptcy petitions. About 8% of the bankruptcy petitions listed educational loans as the only indebtedness. Over 3% of those filing were still in school. About 35% of the individuals had educational debts which represented 60% or more of the total unsecured debts.

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