Biden Administration Reveals 40% of Student Loan Borrowers Missed Payments Amid Expiring Freeze

The Biden administration announced on Friday that approximately 40% of federal student loan borrowers missed their initial monthly payments this fall as the pandemic-era freeze on student debt concluded. The data reveals heightened delinquency levels compared to pre-pandemic times, underscoring the financial strain on borrowers. Here are the key points:

1. Higher Delinquency Rates: Out of the 22 million borrowers with payments due in October, around 8.8 million (40%) failed to make their payments by mid-November. This surpasses the pre-pandemic delinquency rate of 26% in October 2019.
2. Biden Administration Safety Net: The administration has implemented temporary safety net programs to aid struggling borrowers. The “on-ramp” to repayment includes policies such as not reporting delinquency to credit bureaus until September 2024 and postponing harsh debt collection tools.
3. Flexibility for Borrowers: The data highlights that millions of borrowers are taking advantage of the flexibility offered by the administration. Many are utilizing the forbearance policies, preventing delinquency status even if payments are not made until the end of 2024.
4. Loan Default Timing: Due to the forbearance policies, most federal student loan borrowers may not be labeled delinquent until the end of 2024, extending beyond the presidential election. The earliest potential default on debts would be in fall 2025.
5. Excluded Data: The released figures do not include borrowers in deferment or forbearance for reasons such as being in school or a grace period. Around 45 million Americans owe federal student loans totaling more than $1.6 trillion.
6. SAVE Plan: The data incorporates approximately 3 million borrowers benefiting from President Joe Biden’s new student loan repayment program, known as the “SAVE plan.” This income-driven repayment option aims to help manage debt as payments resume.
7. Ongoing Financial Support: James Kvaal, the undersecretary of education, emphasized the administration’s commitment to supporting borrowers during the transition back to repayment, acknowledging that some may be confused or overwhelmed about their options.

In conclusion, the data underscores the financial challenges faced by student loan borrowers as the pandemic-era freeze ends. The Biden administration’s policies aim to provide relief and flexibility, acknowledging the need for ongoing support as borrowers navigate the complexities of repayment.