40% of Borrowers Fail to Make First Student Loan Payments After 3-Year Pause

United States North America Higher Education News Statistics by Erudera News Dec 20, 2023

student’s empty wallet

40 percent of borrowers in the United States have missed their initial student loan payments as repayments restarted after a three-year pause from the COVID-19 pandemic, the US Department of Education said.

In a statement on December 15, the US Undersecretary of Education, James Kvaal, stated that by mid-November, only 60 percent of student loan borrowers whose payments were due in October had managed to make their payments.

Kvaal pointed out that of the 22 million people with payments due in October, over 4 million owe debt for the first time, Erudera.com reports.

“While most borrowers have already made their first payment, others will need more time. Some are confused or overwhelmed about their options. We want to make sure borrowers know that our top priority is to support student loan borrowers as they return to repayment,” he said.

Student loan payments officially resumed on October 1 after a three-year pause that began in March 2020 due to the COVID-19 pandemic.

In response to challenges faced by student loan borrowers, the Biden administration created an “on-ramp” repayment program until October of the next year, Kvaal said.

This program aims to protect student loan borrowers who fail to meet their financial obligations from consequences that result from missed payments, such as "delinquency, default, and mandatory collections."

Last week, President Biden announced nearly $5 billion in student loan forgiveness for 80,300 federal borrowers engaged in public service sectors.

This initiative is expected to benefit eligible borrowers who should have already qualified for the current public service debt relief program but faced delays due to administrative errors.

Additionally, the Biden-Harris administration has launched the SAVE plan, considered the most affordable for student loan borrowers who own large amounts of debt while earn less annually.

So far, over 5.5 million borrowers have joined the SAVE plan. This figure includes 2.9 million people, all of whom are not required to make any payments.

“Because student loans should not come before the necessities, borrowers earning less than about $15 an hour, or more if they have families to support, will have $0 payments on their debt. Borrowers who still owe a payment are saving roughly $102 per month, or $1,244 per year,” Kvaal said.

Moreover, the Biden administration has recently decided to extend the student loan forgiveness deadline, offering additional time for borrowers needing to consolidate their loans in order to qualify for relief.

“If you want to consolidate your loan(s) in order to get the benefit of the adjustment, you should submit a loan consolidation application by April 30, 2024,” the US Department of Education said.

As of the second quarter of 2023, the overall student loan debt in the United States is reported to be over $1.77 trillion.

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