In a drastic rise in financial distress, the end of a student loan payment pause has turned into a nightmare for 9.7 million American borrowers.
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This resumption is more than a minor inconvenience; it’s setting the stage for a worrying surge in borrower delinquency that may eclipse pre-COVID levels.
Discover how this alarming trend exposes the Biden administration’s failure to protect Americans already grappling with economic challenges.
After the expiration of the COVID-era payment pause in September 2023, borrowers found themselves caught in a financial bind.
An estimated total of 9.7 million individuals rapidly slipped into delinquency, illustrating a significant stress test for an economy still on shaky ground.
The Federal Reserve Bank of New York confirms the concern, with past-due federal student loans reaching a staggering 15.6%, amounting to more than $250 billion.
This situation points to the administration’s flawed strategy.
Even with a 12-month “on-ramp” plan meant to ease borrowers into repayment, the majority faltered.
This so-called protective measure doesn’t stop the reality of borrowing stress, and many expect delinquency to exceed pre-pandemic levels.
Policies that fail Americans should not go unexamined.
Credit scores are already on the chopping block for many. This financial impact may downgrade scores by over 150 points, complicating future opportunities for obtaining home or auto loans.
“More than 9 million Americans could see ‘substantial declines’ in their FICO scores in the coming months as delinquent student loans begin showing up on credit reports for the first time since the pandemic, according to a new analysis by the Federal Reserve Bank of New York,” Yahoo Finance points out.
With major losses inevitable, many are questioning Biden’s decision to end the payment pause while an economy hasn’t fully recovered.
The Federal Reserve’s findings reveal that the delinquency rates are likely to overwhelm past metrics, harming borrowers more than the pandemic itself ever did.
Our government should not exacerbate the pain of student debt struggles, leaving Americans with fewer and fewer choices.
As new cohorts of graduates face repayment amid court battles over income-driven repayment plans, we might soon be witnessing the devastating cycle of debt that compounds without immediate resolution.
“According to these numbers, it is reasonable to expect student loan delinquency to surpass pre-pandemic levels when new delinquencies hit credit reports,” reports NBC Chicago.
How it started… the Covid-era payment pause on student loans expired on Sept. 30, 2024.
How it is going… around 9.7 million student loan borrowers are delinquent on their bills after restart, according to a new estimate by the Federal Reserve Bank of New York. pic.twitter.com/HvH0pvbZgO
— Marcelo Cardenal⚡ (@MarcelCardenal) March 26, 2025
