Nearly 9 million student loan borrowers haven’t been paying their bills since payments resumed in October — despite President Joe Biden’s relief programs that included a three-year payment pause.
Some 40% of the 22 million borrowers who had bills due after Biden’s one-time forgiveness plan fell through did not make their October payments by mid-November, Bloomberg reported, citing data from the US Department of Education.
There are signs that even fewer borrowers made payments in November, according to Bloomberg, pointing to the amount of money the Education Department transfers to the US Treasury each month, which it receives from student loan borrowers.
That amount dropped to $5.3 billion in November — down 25% from the almost $7 billion transferred in both September and October, per Bloomberg, which said that many borrowers threw money at their balances during those months to get ahead of the interest restart.
Donald Trump initiated the first of many interest-free student loan payment pauses as an emergency pandemic measure in response to COVID-19 during his presidency, in March 2020.
Once Biden took office, he spurred hope for tens of millions of borrowers that he could slash their bills by $20,000 — a figure that would make some borrowers’ debt vanish entirely — but the Supreme Court squashed those hopes when it ruled that borrowers are on the hook for their balances.
Since 2020, interest on student loans has been held off eight times, though a law signed into effect by the Supreme Court in June to raise the debt ceiling limit prohibited the Biden administration from making another extension.
Thus, as of Sept. 1, interest on student loans started accruing on outstanding balances again.
Biden still hasn’t stopped chipping away at the Supreme Court’s June ruling, announcing in October that his administration is forgiving $9 billion in student loan debt through existing programs.
The figure is less than Biden’s initial plan to wipe away $430 billion in college debt, and came after three changes were made to the summer ruling to ensure that people already eligible for loan forgiveness under existing programs actually got the money wiped from their balance sheets, the White House said at the time.
The move has been bashed by critics, including O’Leary Ventures Chairman and “Shark Tank” veteran Kevin O’Leary, who argued that it’s the individual’s “responsibility” to pay back their debt when taking the steps to obtain a college degree.
He even labeled Biden’s forgiveness plan as “un-American.”
However, 22 million borrowers will still be on the hook for their loans plus interest, though rates vary depending on the year a loan was taken out.
Unless a borrower refinanced over the past three years, the interest rate will accrue at the same rate it did before the first pause, in early 2020, when the benchmark federal funds rate was 1.50% to 1.75%.
The figure has since been pushed to its current 22-year high, between 5.25% and 5.5%.
In that three-year period, borrows have also come to face a litany of additional economic headwinds, including higher housing costs as mortgage payments on a new home edge higher — a whopping 90% rise since Biden took office, according to real estate investment firm CBRE — as well as an increase in automobile debt, as shown by Fitch Ratings data, which found that car payment defaults hit a 29-year high in October.
Food bills have also gotten more expensive thanks to stubbornly high inflation, which rose 3.1% in November, according to the latest Consumer Price Index reading.
Squeezed Americans are struggling to add student loan payments into tighter household budgets.
The Biden administration sought to ease the financial burden by implementing a one-year leniency program from October through Sept. 30, 2024, that does not report missed payments to credit bureaus or place borrowers in default.
Those who don’t make their monthly payment also won’t be considered delinquent under the relief program, referred to as the “on-ramp” transition period, though interest on the loans will still accrue, according to a fact sheet issued by the White House.
An income-driven repayment plan, called SAVE — Saving on a Valuable Education — was also rolled out this summer to help borrowers climb out of debt with payments calculated based on a borrower’s income and family size rather than loan balances.
An Education Department spokesperson celebrated the initiatives in a statement to The Post, which applauded that “60% of borrowers with a payment due made a payment.”
“We think 60% is a solid start and will be working to get more borrowers to make their payments, enroll in SAVE, and successfully manage their loans. And that is why we have the on-ramp to help borrowers adjust to repayment,” the spokesperson added.
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