Half of federal student-loan borrowers are 'at-risk' of falling behind when payments resume in May, government watchdog finds

• The Government Accountability Office investigated plans to resume student-loan payments on May 1.
• It found that 50% of all federal borrowers are at-risk of delinquency, or falling behind on payments.

Student-loan payments are set to resume in under 100 days and half of federal borrowers might not be ready.

The Government Accountability Office (GAO), a government watchdog that oversees federal spending and performance, investigated the impact of the federal student-loan payment resumption on May 1. It noted that, according to Education Department officials, the resumption will present a "significant challenge" to borrowers — largely because many of them may not be equipped to make monthly payments on their debt.

Specifically, the GAO identified 50% of all federal student-loan borrowers as "at-risk" of delinquency, or falling behind on payments, according to data it obtained from student-loan companies in October 2021.

The Education Department identifies "at-risk" borrowers as those who, as of the end of the payment pause extension, fit one of four criteria: They have not graduated and entered repayment in the last 60 months, entered repayment for the first time within the last 36 months, exited payment forbearance in the last 48 months, or were ever 90 days delinquent or more in the year before the payment pause began.

Given the significant amount of borrowers at risk of falling behind on payments, the GAO said the Education Department has been sending monthly emails to those borrowers beginning in September 2021, and it will continue to do so once payments resume that will "include information on the risk of delinquency and available options for borrowers who are struggling to make payments."

Even before Biden extended the payment pause in December, lawmakers and advocates were warning of the risks with throwing borrowers back into repayment when they were not ready. For example, the Student Debt Crisis Center found in November that 89% of fully-employed borrowers did not feel financially secure enough to add another monthly bill to their expenses.

And the Education Department found in November that even during the pause on payments, of the 7.7 million borrowers who were already in default on their loans at the start of the pandemic — meaning they were delinquent for more than 90 days — 93% of them are still behind.

Defaulting on student loans can have a range of consequences, including wage garnishment and the withholding of federal benefits. Despite the risks, Biden still told borrowers in December to "do their part" in preparing for the resumption of payments. White House Press Secretary Jen Psaki recently said that "no one has been required to pay a single dime" in federal loans under Biden, while many borrowers are still not in good-standing on their debt.

Dozens of Democratic lawmakers want to ensure borrowers are protected from all the risks with a payment resumption, calling on Biden on Wednesday to act on the issue by canceling $50,000 in student debt for every federal borrower before May 1.

They wrote that "eliminating debt before the pause ends is a commonsense step so that millions of borrowers have more breathing room in their family budgets and our national economy is not further held back."