The national student-loan-debt crisis has ballooned to a formidable $1.4 trillion, but the students who are actually in crisis and need the most help aren’t necessarily those with the most debt.

“We hear a lot about the outliers who borrow close to $100,000, but data shows most students are not in that situation,” Megan McClean Coval, vice president of Policy & Federal Relations at the National Association of Student Financial Aid Administrators (NASFAA), a nonprofit membership organization, tells Financial Advisor.

In 2015, 38 percent of all borrowers with outstanding student loan debt owed less than $10,000, according to the College Board report Trends in Student Aid 2016.
Only 16 percent (including 10 percent of undergraduate borrowers) owed $40,000 or more.

There’s also some disconnect between the media messages and who’s actually defaulting, says Coval. According to the report, default rates are highest for borrowers who leave school owing less than $5,000—and decline as loan balances increase.

Borrowers who left school without a degree or certificate and entered the repayment process in 2011-12 were more likely to default within two years (24 percent) than those who complete their programs (9 percent). Students who borrowed money to attend for-profit and two-year public colleges have the smallest debts but highest default rates, the report also indicates.

“NASFAA wants to see students borrow smartly,” says Coval, so it’s been advocating for federal regulations that would give financial aid administrators some authority to limit borrowing—such as prorating federal student loans for part-time students—and require more loan counseling to students. It’s also pushing for legislation to streamline student-loan repayment plans.

Meanwhile, advisors and families may want to check out cohort default rates, the percentage of a school’s borrowers who default within a couple years of entering repayment. This data is released annually by the Department of Education. “Colleges are on the hook for cohort default rates,” says Coval. If they’re too high, schools can lose Title IV [federally funded] grants and loans.

Although a cohort default rate isn’t a perfect measure, she says, “It’s a good barometer for schools to do some reflection” about the consumer information and loan counseling they’re providing.

Under the Higher Education Act, schools must offer one-time entrance and one-time exit counseling to students. They can’t require more counseling because it’s viewed as a barrier to entitlement money, says Coval. But the Department of Education recently began piloting a program to see if mandating additional loan counseling can boost academic outcomes and help students better manage their debt.

Currently, there are eight student-loan repayment plans, which sport different terms and conditions. “It’s very confusing and burdensome,” says Coval, who notes students may not realize which option is most reasonable for them. Reenrollment can also be tricky because the plans have different eligibility criteria and enactment dates. Instead, NASFAA would like to see borrowers offered one standard plan, one income-driven plan and automatic reenrollment.

The House and Senate have been working on legislation to streamline student loan repayments and to simplify and add transparency to the financial aid process. Other draft legislation aims to enhance financial aid counseling and to restore year-round Pell grants, which could help students attend summer classes and graduate faster.

Although some of the ideas have bipartisan interest, NAFSAA’s policy team concurs it’s too early to speculate how likely these things are to move forward under the Trump administration. Hopefully the administration will do its homework.