Delinquencies are expected to rise in the coming months after President Joe Biden's 12-month grace period for student loan borrowers ended in September.
Biden last year announced an on-ramp period from Oct. 1, 2023, to Sept. 30, 2024, to allow borrowers more time to prepare for repayment after three years of paused payments during the pandemic beginning in 2020. Although student loan debt has continued to accrue interest, missed payments did not immediately harm borrowers' credit—or lead to wage garnishments or loan default.
Millions of borrowers now responsible for missed, late, or partial payments will have to start student loan repayment.
Borrowers who did not enroll in the federal Fresh Start program by Oct. 2 will—for the first time in more than four years—face repercussions on their credit report for not making monthly payments. The Fresh Start program changes your loan status from “default” to “in repayment” and enrolls you in an income-driven repayment (IDR) plan that fits your budget.
Now that borrowers face repayment, student loan delinquencies are expected to rise "substantially" in the months ahead, according to Deutsche Bank.
The 8 million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan will still be in forbearance. The Department of Education placed SAVE plan borrowers into forbearance until the lawsuits against the repayment plan are finalized. This means they will not have to make payments and will not accrue interest on their loans.
Older generations that own disproportionate amounts of student debt may be hit harder than others, according to data from Fidelity.
Based on users of its student loan guidance and resources tool, Student Debt Tool, Fidelity found that the baby boomer generation (born between 1946 and 1964) holds the most student loan debt. This is likely due to loans the generation carries on behalf of their children.
Fidelity’s data on loan amount averages are higher than those reported by the Department of Education. The most recent Department of Education data shows that borrowers aged 35 to 49 hold the most outstanding loans, totaling nearly $636 billion.
However, the average borrower between the ages of 50 and 61 owes more than $45,700 in student loan debt, the highest average of all age groups.
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