Supporters of student loan forgiveness rally outside the U.S. Supreme Court building in Washington, D.C., June 30, 2023, after the nation’s highest court struck down President Joe Biden’s student debt relief program.
Kent Nishimura | Los Angeles Times | Getty Images
In June, the Supreme Court blocked President Joe Biden’s plan to cancel up to $20,000 in student loans per borrower, but that warning is now becoming reality.Until that point: just 60% According to U.S. Department of Education data released this month, a higher percentage of people with federal education loans due in October paid their bills by mid-November.
Student loan balances in the United States are currently $1.7 trillionburdens Americans more than credit card or car loan debt.
The average loan balance upon graduation has tripled since the 1990s, from $10,000 to $30,000. Additionally, approximately 7% of student loan borrowers currently owe more than $100,000.
Here’s what experts have to say about the new discovery.
Astra Taylor, co-founder of the Debt Collective, said the fact that up to 40% of borrowers didn’t pay shows “what we’ve been warning about is going to happen if Biden gets the debt collection machinery up and running again.” It truly reflects that.” Association for debtors.
“Faced with impossible choices between feeding their children, keeping a roof over their heads, and dumping an average of $400 a month into a Department of Education incinerator, borrowers are struggling to keep themselves and their families afloat financially. You’re making the right choice,” Taylor said.
astra taylor
Provided by: Astra Taylor
“This is essentially a massive student loan strike,” she added.
Debt Collective was recently founded petition Under this program, borrowers can send a letter to the U.S. Department of Education requesting that their student loans be canceled. The group says more than 35,000 people have done so so far.
Borrower repayment problems are “unfortunately not surprising,” he said. Persis YuDeputy Executive Director of the Student Borrower Protection Center.
“Neither the borrower nor the student loan system was ready to resume repayments,” Yu said.
Even before the pandemic, when the U.S. economy was in one of its healthiest periods in history, nearly half of student loan borrowers were either behind on their payments or enrolled in hardship relief such as forbearance or forbearance. An analysis revealed that. Mark Kantrowitz, higher education expert.
Personal Finance Details:
IRS announces disclosure program for companies fooled by pandemic-era tax credits
3 tips for year-end investment taxes from a top-ranked financial advisor
IRS waives $1 billion in fines.Who qualifies and how much will taxpayers get?
Meanwhile, Yu said, “servicers are overwhelmed and unable to help distressed borrowers navigate the options available to them.”
In fact, many borrowers are struggling to keep their student loans current, including long wait times to contact their servicer, incorrect bills, lost account information, and confusion over new options that have been rolled out over the past three years. He says he is having difficulties.
Director Carolina Rodriguez Education Loan Consumer Assistance ProgramThe New York nonprofit said she has never seen this kind of disruption in the student loan industry.
“Debt collectors have a very hard time getting people to pay back their debts,” Rodriguez said.
Yu noted that Biden’s plan to forgive student loans was aimed at alleviating the hardships of borrowers, and that legal challenges to the president’s relief and the Supreme Court’s ruling on the current situation. He claimed it was his fault.
“What we’re seeing is the natural result of right-wing efforts to kill debt relief,” Yu said.
On the other hand, other financial experts point out that it is inevitable that it will be difficult to return to repayments after more than three years.
“We believe some of that is due to some borrowers not realizing their payments were coming due,” President Betsy Mayotte said. Student Loan Advisor Associationa non-profit organization.
Meanwhile, some people may take advantage of the Biden administration’s 12-month “preparation period” for repayments, during which they will be protected from the worst consequences of delinquency, experts say.
but scott buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, is concerned that some student loan holders are confusing that relief with another extension of the payment moratorium. said. (The invoice deadline has been extended eight times.)
“There’s a fundamental difference here,” Buchanan said. “Interest is currently accruing.”
During the payment moratorium that took effect in March 2020, interest rates on most federal student loans were set at zero. However, interest started accruing again on September 1st.
As a result, the balances of borrowers who are not currently making payments will increase.
Still, Buchanan said he wasn’t surprised by the large proportion of borrowers who still haven’t made their payments. He said it is usually a difficult process to get people back into repayments after a long hiatus from claims.
“It is likely that the situation will not return to normal until early 2024,” Buchanan said.
