More borrowers made payments on their loans in January and February of this year than in any previous month since data collection began in 2018.
04/25/2024 2:20 P.M.
2 minute read
New data released from the Department of Education reveals the hurdles and successes the department has faced in the first three months of the return to student loan repayment, according to a recent blog post.
With the resumption of payments for federal student loan borrowers after a 43-month hiatus, the Department of Education faces the daunting task of smoothly transitioning borrowers back into repayment while ensuring affordability and accessibility.
Between October and November of last year, over 28 million borrowers entered repayment. Many of these borrowers, after years of pause, found themselves negotiating repayment terms for the first time or reacquainting themselves with the intricacies of loan management. Additionally, the pandemic-induced payment pause led to a reshuffling of loan servicers, adding another layer of complexity to the process.
Despite these hurdles, in January and February of this year, more borrowers made payments on their loans than in any previous month since data collection began in 2018.
One significant factor contributing to this progress is the Biden administration’s initiatives aimed at supporting borrowers during this transition.
“[The administration] created an on-ramp to repayment whereby payments are due and interest accrues, but the negative consequences of missed payments like credit reporting and involuntary collections are suspended for 12 months,” according to the DOE. “The early progress over the first five months after the payment pause ended is encouraging, and the [a]dministration is continuing to provide support to borrowers to help them successfully manage repayment on their student loans.”
However, the road to recovery is not entirely smooth. Data analysis reveals a decline in the share of borrowers who are current on their loans, a trend attributed to compositional changes in the borrower population. Factors such as an increase in borrowers new to repayment and the inclusion of previously defaulting borrowers skew the comparison of repayment rates before and after the pandemic.
Looking ahead, the Biden administration has established its commitment to reforming the student loan system and providing relief to borrowers in need. Through executive actions and policy initiatives, the administration continues to address the systemic challenges plaguing student loan repayment, striving to make payments more manageable and equitable for all borrowers.
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