New ed. Department data revealed that 93% of federal student loan borrowers are still in default, even after the payment break.
Administrative obstacles made it difficult for these borrowers to return to good standing during the pandemic.
The department would consider a “safety net” to facilitate repayment of borrowers.
New data Education Department reveals that of the 7.7 million federal student loan borrowers in the United States who were behind on payments at the start of the pandemic, 93% are still late – despite a near hiatus two years in payments.
During the payment break, defaulting borrowers also had the opportunity to participate in the “rehabilitation” program, which allowed borrowers to make nine monthly payments during the break in order to be brought back into order. And given the payment break, borrowers could count 0 payments on their progress.
But to participate in the program, borrowers had to complete a significant amount of paperwork and contact their student loan company, which, as Insider reported, is not easy and leaves many borrowers without the information they need to pay off their debt.
“It is no exaggeration to say that even with massive federal intervention to provide borrowers with an escape route from default during COVID, virtually no borrower has successfully accessed it,” the Student Borrower Protection Center wrote in its to analyse. “These findings are a startling indictment of the systems borrowers depend on to secure their rights under the law.”
Based on the data and a analysis According to the Student Borrower Protection Center, of the 5.7 million borrowers with federal direct student loans in default at the start of the pandemic, 91 percent of them are still in default. In addition, of the 2.8 million borrowers in the Federal Family Education Loan (FFEL) program, held by the Department of Education, 95% of them are still in default.
Of the federal student loan portfolio as a whole, 93% of the 7.7 million borrowers who defaulted on $ 168 billion in student loans at the start of the pandemic are still in default.
Even though many borrowers are not ready to resume their payments on February 1, the Education Department has made it clear that they do not plan to change the schedule. However, the ministry would consider a “security net” for borrowers once payments are resumed, one of which could include automatically wiping overdue payments for 7 million borrowers and giving them a “fresh start”. Details of these plans have yet to be finalized.
Defaulting on student debt can have a variety of negative impacts on a borrower’s financial situation. Not only can this lead to a payday garnishment, defaulting borrowers with children can also risk having their payday garnished. seized child tax credit – an essential family service.
And in July, Massachusetts Senator Elizabeth Warren and Representative Ayanna Pressley led a group of Democrats to write a letter Education Secretary Miguel Cardona, fearing that borrowers could be “plunged back into” repayment without a plan to protect their credit ratings and financial stability.
Read the original article on Business intern