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More Borrowers at Risk of Defaulting

More Borrowers at Risk of Defaulting

Inside Higher Ed

Katherine Knott
June 12, 2023
More student loan borrowers are behind on their credit card bills and loans than before the pandemic, and they are paying more because of rising interest rates, a new report from the Consumer Financial Protection Bureau found.
The rising delinquencies mean that more borrowers will be at risk of defaulting when payments turn back on later this summer after a three-year pause. Nearly 20 percent of borrowers, about 5.9 million, have two or more risk factors that indicate they’ll struggle with making their student loan payments. That’s up from the estimated 5.1 million borrowers who were at risk in April 2022.
The Consumer Financial Protection Bureau has tracked the credit health of student borrowers during the pandemic. Its latest update comes as borrowers await a ruling from the Supreme Court on whether the Biden administration can carry out its one-time debt-relief plan. The court is expected to release its decision sometime this month. Student loan payments will resume 60 days after June 30.
The administration has said that debt relief is needed to prevent high rates of default and delinquency when payments resume. The bureau’s data, which are based on a sample that represents about 32 million federal student loan borrowers, shows that young people and those with low incomes will likely struggle to make their payments.
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