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With $1.6 Trillion Owed By 42.7 Million Student Loan Borrowers, Federal Government Resumes Collections After 5 Years As Delinquencies Reach Record High

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With $1.6 Trillion Owed By 42.7 Million Student Loan Borrowers, Federal Government Resumes Collections After 5 Years As Delinquencies Reach Record High

As the federal government resumes collections on defaulted loans for the first time since 2020, millions of student loan borrowers are at risk of major financial setbacks.

New data from TransUnion shows an unprecedented spike in serious delinquencies, just as the Department of Education and the Treasury Department move to recover unpaid debt starting this week.

What Happened: As of February, 20.5% of borrowers with student loan payments due were more than 90 days past their due date.

This is the highest delinquency rate on record, as per TransUnion's May 5 report. This figure is almost double the 11.5% reported in February 2020, before pandemic-era relief measures came into effect. At present, only around a third of the 43 million federal student loan borrowers are making regular payments.

See Also: Trump Says ‘I Don’t Know’ When Asked If He Has To Uphold The Constitution When It Comes To Mass Deportations

Why It Matters: Borrowers who defaulted after the temporary "on-ramp" program concluded witnessed their credit scores fall by an average of 63 points. Super prime borrowers, who usually have robust credit histories, incurred losses of up to 175 points.

2.7 million borrowers with severe delinquencies could find their ability to get loans, buy homes, or even qualify for rental housing impacted negatively.

"42.7 million borrowers owe more than $1.6 trillion in student debt", according to the Department of Education.

Last week, House Republicans introduced a bill to overhaul the federal student loan system, projecting more than $330 billion in savings and aligning with President Donald Trump's push to extend tax cuts.

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Photo courtesy: Shutterstock

 

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Posted-In: student loansNews Education Politics

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