Millions of Americans suddenly owe billions of dollars in student debt after years of forbearance
By Justin Lahart of The WSJ. Excerpts:
"Millions of Americans had their student-loan payments put on pause during the pandemic. Now they are back on the hook again."
"Around 5.6 million borrowers were marked newly delinquent on their student loans in the first three months of this year."
"Borrowers have been required to repay their student loans for some months now. But just this month, the Trump administration began putting millions of defaulted student-loan borrowers into collections, and threatened to confiscate their wages, tax refunds and federal benefits."
"payments this year will rise by a collective $1 billion to $3 billion a month."
"there are about eight million borrowers in the Saving on a Valuable Education plan . . . that allows borrowers to pay based on their income"
"Those borrowers will likely need to begin payments late this year or early next."
"it was only last fall that missed payments could be reported to the credit-rating companies—a fact that many borrowers probably found out the hard way when they noticed a big drop in their credit scores this year."
"there has been a surge in delinquencies, as measured by loans that are more than 90 days past due."
"the student loan delinquency rate jumped from 0.7% in the fourth quarter to 8% in the first quarter, back to around where it was before the pandemic."
"the student loan delinquency rate jumped from 0.7% in the fourth quarter to 8% in the first quarter, back to around where it was before the pandemic."
"so many people went so long without paying that they will have a hard time paying now."
"Many of the millions of borrowers marked newly delinquent on their student loans already had subprime credit ratings"
"The average credit score of the near-prime borrowers fell by 140 points, and for the prime borrowers it fell 177 points."
"many borrowers who last year might have qualified for a credit card, auto loan or mortgage won’t be able to qualify anymore."
"many borrowers didn’t really expect they would need to start paying again and built their budgets around that belief. At particular risk might be those borrowers who graduated when the loan pause was in effect, and who don’t have experience with loan repayments."
Related posts:
Who Is Most Likely To Default On Their Student Loans? (2016)
The Diminishing Returns of a College Degree: In the mid-1970s, far less than 1% of taxi drivers were graduates. By 2010 more than 15% were (2017)
Student-Debt Forgiveness Is a Wonderful Boon, Until the IRS Comes Calling: Education analysts, student advocates warn of impending crisis from one-time tax bills individuals may not be prepared to pay off (2018)
Is the U.S. student loan system broken? (2019)
Student Borrowers Tap a New Path to Loan Forgiveness: Bankruptcy (2023)
Their Student Debt Disappeared, but Their Financial Worries Persist (2024)
Will the Rising Use of Student Loans Hurt the Economy? (2007)
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