LOS ANGELES, California – A new estimate from the Federal Reserve Bank of New York reveals that approximately 9.7 million student loan borrowers have fallen behind on payments following the expiration of the Covid-era payment pause. This situation emerged after the Biden administration granted borrowers a 12-month “on-ramp” to repayment once the Covid-era pause on federal student loan payments came to an end in September 2023. Throughout this transitional period, borrowers were shielded from many consequences associated with delinquency. However, as of September 30, 2024, this relief period concluded, leading to concerning statistics.
At the end of the off-ramp period, the New York Fed’s estimate indicated that the percentage of past-due federal student loans had reached 15.6%, culminating in over $250 billion in delinquent debt. The Fed’s report highlights a potential future trend where student loan delinquencies may surpass pre-pandemic levels once new delinquencies are reflected on credit reports, potentially posing detrimental effects on borrowers’ financial health.
In addition to the financial implications, the Fed warns that new student loan delinquencies could lead to a steep drop in a borrower’s credit score by over 150 points. This significant impact emphasizes the importance of timely and consistent repayment of student loans to maintain a favorable credit standing. As these alarming figures circulate, borrowers and policymakers alike face the challenge of addressing the looming consequences of student loan delinquency in the post-Covid era.