A record number of student loan borrowers have a very big problem
Transcript:
Now that the Trump Administration has vowed to restart collecting the federal student loans in default, TransUnion revealed how messy the situation could potentially get.
A new report by the firm shows that roughly 20% of federal student loan borrowers with a payment due are seriously delinquent. That means about 4 million Americans have a payment that’s 90-plus days overdue.
For comparison, in February 2020 – just before the start of the pandemic – 11.5%, or 2.6 million people, fell into the seriously delinquent category.
A serious delinquency can drastically affect your credit score. According to the Federal Reserve Bank of New York, new student loan delinquencies have dropped excellent credit scores by an average of 171 points. Subprime borrowers have taken an average hit of 87 points.
A delinquency can also limit the amount you’re allowed to borrow, as well as increase the cost of future loans.
And according to TransUnion’s Head of U.S. research and consulting, “Borrowers who have not been repaying will likely have to make a number of challenging budgeting decisions.”
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