Was There a Student Loan Crisis in 2006?

Back in 2006, you would have been hard pressed to find a news story about student loans. It was, after all, the middle of an economic boom. That is in stark contrast to today when it seems everyone believes student loans are a big national problem. So what happens if you put the federal student loan portfolio of 2006 side-by-side with the portfolio today? Ok, yes it now tops $1 trillion in size compared to $441 billion back then. That has been the story about student loans for two years. But what about defaults, loans that remain unpaid for nearly a year? Surely they make up a much larger share today than during the boom times of 2006. Not so.

This information is not widely known because the U.S. Department of Education only started disclosing the repayment status of the federal student loan portfolio recently. A single year’s worth of information is now available. Otherwise the information has been locked away in a clunky federal database off-limits to anyone outside of the government—with one notable exception. Buried in the back of a 2007 Congressional Budget Office study (later appearing in a book) that used the restricted data to analyze student loan costs is a chart showing the repayment status of the loan portfolio in 2006. It offers a rare glimpse of the program during that time.

With a few adjustments and cross-references to the information from that chart, we can make it comparable to what the Department of Education releases now on a quarterly basis. The results are presented in the table below.

Remarkably, there is almost no noticeable difference in defaults as a share of the portfolio between now and then. In fact, if the percentage share is not displayed to the first decimal place, there is no change in the share of the portfolio in default (as measured in loan value). The value of loans in default is a constant 9 percent of all outstanding federal student loans in 2006, 2013 and 2014.

To be sure, default is only one of many ways to measure whether borrowers are struggling with student loans. And there are plenty of ways to interpret the information in the table. Still, it wouldn’t be crazy to ask someone who talks of a “student loan crisis” or a “student loan bubble” whether they are referring to the one in 2006 or the one today.