- New Ed. Dept. data found 93% of federal student-loan borrowers are still in
default , even after the payment pause. - Administrative hurdles made it difficult for those borrowers to return to good standing during the pandemic.
New data from the
During the payment pause, borrowers in default also had the opportunity to participate in the Education Department's "rehabilitation" program, which allowed borrowers to make nine monthly payments during the pause in order to be brought back into good standing. And given the payment pause, borrowers could count $0 payments toward their progress.
But in order to participate in the program, borrowers had to complete significant amounts of paperwork and communicate with their student-loan company, which, as Insider has reported, is no easy feat and leaves many borrowers without the information they need to pay off their debt.
"It is no exaggeration to say that even with massive federal intervention to provide borrowers a pathway out of default during COVID, hardly any borrowers successfully accessed it," the Student Borrower Protection Center wrote in its analysis. "These findings are a startling indictment of the systems that borrowers depend on to secure their rights under the law."
According to the data and an analysis by the Student Borrower Protection Center, of the 5.7 million borrowers with federal direct
Across the entirety of the federal student loan portfolio, 93% of the 7.7 million borrowers who were in default on $168 billion in student loans at the start of the pandemic are still in default.
—Student Borrower Protection Center (@theSBPC) November 16, 2021
Even though many borrowers are not prepared to resume payments on February 1, the Education Department has made clear they are not planning on altering the timeline. However, the department is reportedly considering a "safety net" for borrowers once payments resume, one of which could include automatically erasing defaulted payments for 7 million borrowers and giving them a "fresh start." Details for those plans have yet to be finalized.
Defaulting on
And in July, Massachusetts Sen. Elizabeth Warren and Rep. Ayanna Pressley led a group of Democrats in writing a letter to Education Secretary Miguel Cardona with concerns of "plunging" borrowers back into repayment without a plan to protect their credit scores and financial stability.