Student loan defaults shot up 17% last year

4.2M borrowers can’t pay; total debt on all loans hits $1.3 trillion.

The stock market is up and unemployment i s down, but things aren’t rosy for all Americans.

A new analysis of government data by the Consumer Federation of America found that the number of Americans in default on their student loans jumped by nearly 17 percent last year.

As of the end of 2016, there were 4.2 million Federal Direct Loan borrowers in default, meaning they’ve not made a payment in more than 270 days. That’s up from 3.6 million at the end of 2015.

An average of 3,000 people default on federal student loans daily, the CFA found.

“Despite all improvements in the economy, student loan borrowers are still struggling,” said Rohit Chopra, senior fellow at the Consumer Federation of America and formerly the Consumer Financial Protection Bureau’s Student Loan Ombudsman.

As of the end of 2016, 42.4 million Americans owed $1.3 trillion in federal student loans, according to the U.S. Department of Education data.

This doesn’t include borrowing through private student loans, credit cards and home equit y loans to finance the growing costs of college.

The Federal Reserve System puts the measure slightly higher at $1.4 trillion, as it includes private loans as well.

Defaulting on a federal student loan can be a financial disaster for the borrower. Unlike other types of debts, most federal student loans cannot be discharged in bankruptc y. Those who go into default face serious repercussions including wage garnishment, damaged credit scores and potentially added costs in fees, interest and legal fees.

Student debt has risen along with the cost of education, which makes repayment difficult. The average amount owed per borrower rose to $30,650 in 2016, after rising steadily for years. In 2013, borrowers on average owed $26,300.

The good news is that the number of people who are defaulting for the first time is down. But the number of people defaulting for the second time or more is up. And that worries the CFA, an association of more than 250 nonprofit consumer groups.

Other reports have also painted a bleak picture for student loan borrowers in the U.S.

The New York Federal Reserve, which looks at slightly different data, reported last month that total household debt in America in 2016 began nearing its previous peak from 2008, driven largely by student debt and auto debt.

I t f i n d s t h a t s t u d e n t l o a n defaults jumped sharply in 2012 and the default rate has held fairly steady since. But the New York Fed also warns that the true number of people unable to pay is much higher because about half of loans are in forebearance, deferment or a grace period so are not at risk of being in default.