Nearly 60% of borrowers with the Department of Education did not make any loan payments during the COVID-19 pandemic freeze, according to a Federal Reserve Board of Governors article from last week.
In the same article, Fed staffers also warned that approximately 11.5 million DOE borrowers might not make payments on their loans when the freeze expires, which could come as early as Sept. 1.
"These borrowers hold almost $400 billion in outstanding student loan debt and, prior to the pandemic, were required to pay about $2.8 billion a month toward their student loan debt," according to the Fed board.
The freeze was initiated by then-President Donald Trump in March 2020, coinciding with the shutdown of businesses nationwide during that early period of the COVID-19 pandemic.
And President Joe Biden has extended the program again through Aug. 31 — but with no guarantee of extending it through the fall.
However, President Biden is reportedly thinking about crafting an executive order geared toward canceling at least $10,000 in student debt for borrowers earning less than $150,000 per year, or $300,000 for married couples.
"No decisions have been made yet; but as a reminder, no one has been required to pay a single dime of student loans since the president took office," deputy White House press secretary Vedant Patel said last week.
As time marches on, post-pandemic, the Fed article reports a greater divide taking place among the DOE borrowers.
As two examples, "delinquency on credit card, auto and home loan payments began rising toward the end of last year," the result of bills and other financial commitments piling up after the COVID-19 pandemic, and more than 30% of borrowers aren't able to make student loan payments for at least three consecutive months.
Conversely, of the 8.8 million borrowers who made at least one student loan payment during the pandemic freeze, roughly 40% were reportedly in position to make consistent payments, citing the fed board article.
In recent months, according to the Fed report, the government changed the status for 3.2 million borrowers from "behind on payments" to "current."
That might have helped limited-earning borrowers in the short term, but it doesn't necessarily provide a long-term answer to what plagues some borrowers.
"Nevertheless," the Fed authors concluded, "existing federal student loan repayment plans that tie monthly payments to incomes could help alleviate repayment burdens for vulnerable borrowers who enroll in them."
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