- About 1 in 5 student loan borrowers could struggle to make monthly payments once they resume in August, as they have certain risk factors on their records, according to the U.S. Consumer Financial Protection Bureau.
- These risk factors include being delinquent on their student loans before the pandemic, or getting assistance to pay off those debts, the CFPB said in an online post Wednesday.
- As of March this year, the agency had identified 2.5 million student loan borrowers who were delinquent on other forms of debt, amounting to more than 1 in 13. This is 200,000 more delinquent borrowers than the CFPB found in its last analysis in September 2022.
Both the Trump and Biden administrations have extended the pandemic-era freeze on student loan repayments. But in recent months, Republicans criticized plans to continue the pause, particularly as COVID-19 restrictions waned.
Conservative lawmakers have also accused the current administration of botching the repayment rollout, saying executive officials have not been clear with loan servicers or borrowers about the timing and details of the transition.
The U.S. Department of Education had previously not set an exact date for payments to restart, but as a part of the debt ceiling deal House Speaker Kevin McCarthy struck with President Joe Biden this month, they will resume 60 days after the end of June, which is Aug. 29.
The CFPB report provides colleges and policymakers with a glimpse of the likely fallout of the payments starting back up. Borrowers haven’t needed to pay for about three years, portending a rocky restart.
The agency found that non-student loan delinquencies remained low until mid-2021, in part because policy initiatives like pandemic stimulus payments shielded consumers.
However, as those programs expired, the share of student loan borrowers who were behind on other debt payments began to rise. In August of last year, it surpassed the pre-pandemic share.
That trend continued until March 2023, when the percentage fell for the first time in a year.
“While it is possible this decrease represents a new trend, we do not think it signals improving conditions for these borrowers,” the CFPB wrote, noting fewer delinquencies tend to occur every March. This could be because consumers receive money from tax returns, the CFPB wrote.
Further, more than 4 in 10 borrowers, or more than 14 million, will be dealing with a new loan servicer once payments resume, potentially confusing consumers as they adjust.
“For some borrowers, this process may be smooth with few changes,” the CFPB wrote. “But other borrowers may need to create new logins with their new servicer, re-enroll in autopay, or update their payment information.”