A Shocking 40% Of Student Loan Borrowers Missed First Payment After Pandemic-Era Freeze Expired

In October, the number of Americans delinquent on subprime auto loans hit the highest rate on record, amid a rise in Google searches for “give car back” – while the number of people who are upside-down on auto loans is at the highest level since April 2020.

Now, according to data released Friday by the Biden administration, 40% of student loan borrowers skipped their payment in October, the first since the pandemic-era freeze on student debt expired.

Around 8.8 million out of 22 million borrowers who missed the October payment had failed to make their payment by mid-November, a sharp contrast to the October 2019 pre-pandemic period, when 26% of borrowers (still high!) missed their payments, Politico reports.

“While most borrowers have already made their first payment, others will need more time,” said James Kvaal, the undersecretary of education, said in a blog post which accompanied Friday’s data. “Some are confused or overwhelmed about their options. We want to make sure borrowers know that our top priority is to support student loan borrowers as they return to repayment.”

The Education Department emphasized on Friday that a majority of borrowers successfully paid their first monthly payment. About 60 percent of borrowers — some 13.2 million people — who owed a payment in October made the payment by the middle of last month, said the department.

The new data shows, for the first time, that millions of borrowers are availing themselves of the flexibility that the Biden administration has offered borrowers, which officials have dubbed the “on-ramp” to repayment.

These “on-ramp” include a suspension of reporting delinquencies to credit bureaus through the end of September next year and postponing aggressive debt collection methods like wage garnishment. However, these forbearance policies imply that most borrowers won’t face the consequences of delinquency until the end of 2024, with defaults not occurring until fall 2025 at the earliest.

The figures also don’t include borrowers who didn’t owe a payment in October because they’re still students, or because they’re in a grace period, or had another type of deferment or forbearance agreement.

Roughly 45 million Americans owe some $1.6 trillion in total.

Source: ZeroHedge

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