Less than half of student loan borrowers have been making their payments on $1.6 trillion of debt as they struggle to afford housing and groceries – and some are letting the bills pile up as a form of protest.
Only 38% of the 42.7 million borrowers nationwide are in repayment and current following five years of leniency measures from the US government following the COVID-19 pandemic, the Department of Education said in April.
While most borrowers have loans that are less than $40,000, about 3.6 million Americans owe more than $100,000 each in federal loans totaling $656.7 billion – or about 41% of total student debt.
As of May, about 30% of borrowers with a payment due, or 5.6 million people, were at least 90 days behind, according to TransUnion data.
At the 270-day mark, the government can withhold tax refunds and order employers to garnish up to 15% of a borrower’s after-tax salary.
But these consequences may “feel too abstract to feel motivational for people,” Sarah Newcomb, senior behavioral scientist at Edward Jones, told Bloomberg.
About 2.2 million borrowers saw their credit scores tank by at least 100 points in the first quarter, according to the New York Federal Reserve.
Kameron Davis, a 24-year-old Uber driver in Miami, recently saw his credit score plunge about 180 points for not paying his student loans – but he’s unbothered since he doesn’t plan to buy a home anytime soon.
After dropping out of college when classes went online during the pandemic, Davis is more concerned with supporting his wife and two kids than prioritizing an $800 monthly student-loan payment. --->READ MORE HERE
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Millions of student loan holders may see their paychecks garnished to recover their defaulted debts this month.
According to a report by credit bureau TransUnion, some 1 million borrowers will enter default this month—meaning they will become subject to federal collections, as well as dented credit scores and other unwanted elements.
Why It Matters
Student loan collections were largely paused beginning in March 2020 due to the COVID-19 pandemic, under the Joe Biden administration. But this has changed under President Donald Trump.
The process of resuming collections began in May, as the Department of Education warned that borrowers who fell behind and failed to take action could face wage garnishment and significant damage to their credit scores.
What To Know
Approximately 270 days after a borrower first becomes 90 or more days past due on a loan, they are classified as in default and become subject to collection efforts by the Department of Education. At that point, loan holders are at risk of having 15 percent of their pay docked to help pay off the debt.
Of the 5.8 million borrowers who recently became delinquent (usually having missed one quarterly payment), an estimated one-third—about 1.8 million—were expected to enter default in July 2025, according to TransUnion. Another 1 million are projected to default in August, followed by an additional 2 million in September. --->READ MORE HEREFollow links below to relevant/related stories and resources:
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