Speaker 1: Americans are struggling to repay their federal student loans. The
Speaker 1: number in default has searched by millions in just the
Speaker 1: last year, to take the total to more than nine
Speaker 1: and a half million.
Speaker 2: We have got to give some relief off of our
Speaker 2: bags for these student loans.
Speaker 3: It's ridiculous.
Speaker 2: I can't afford my students can't afford then, But the
Speaker 2: Department of Education thought, sending me an email saying the
Speaker 2: save plan was ending, was going to suddenly make me
Speaker 2: have fourteen hundred dollars a month to give them for
Speaker 2: a student loan payment.
Speaker 3: I am drowning in student debt. I have over forty
Speaker 3: five thousand dollars in student debt.
Speaker 1: Amy Salada is a senior advisor at protect boris, a
Speaker 1: student debt advocacy group.
Speaker 3: The number of defaults that was happening, it was like
Speaker 3: one person every twenty six seconds, and now it's one
Speaker 3: person every nine seconds.
Speaker 1: So how did we get here? You've probably already heard
Speaker 1: that going to college in the US is expensive, and
Speaker 1: for many students that means borrowing from the government to
Speaker 1: cover tuition and living costs. In fact, the average public
Speaker 1: university student borrows thirty two thousand dollars to obtain a
Speaker 1: bachelor's degree. After leaving college, they have to pay back
Speaker 1: those loans, which sometimes takes decades. Let's just rewind a little.
Speaker 1: During the COVID nineteen pandemic, the Trump administration passed federal
Speaker 1: student loan payments as an emergency relief measure. It was
Speaker 1: meant to last just a few months, but it turned
Speaker 1: into more than three years, during which most boroughs didn't
Speaker 1: have to make payments.
Speaker 3: We're still going through the ramifications of that.
Speaker 4: When student loan payments were completely paused.
Speaker 1: Judith Scott Clayton is an economist at Columbia University and
Speaker 1: an expert in student debt. When payments resumed, policymakers tried
Speaker 1: to make the transition easier.
Speaker 3: Under the Biden administration, there was something called the on
Speaker 3: Ram period, where for a year, if you didn't pay
Speaker 3: on your student loans, you didn't suffer some of the
Speaker 3: negative consequences of non payment.
Speaker 1: But those protections ended in September twenty twenty four. So
Speaker 1: imagine being a borough who's made no student loan payments
Speaker 1: in years and now suddenly has to find hundreds of
Speaker 1: dollars every month. And there's another complication, courts blocked a
Speaker 1: plan called Save that tight monthly payments to income. It
Speaker 1: was there to help struggling borrows stay on track with
Speaker 1: their loans. That court decision has led many looking for alternatives.
Speaker 3: It was the most affordable payment plan that has a
Speaker 3: very existent for student loan borrowers.
Speaker 1: And experts say the alternatives could make repayment more challenging
Speaker 1: for borrows across the income spectrum. The impact could be
Speaker 1: felt most acutely by those who can least afford it.
Speaker 4: They would have been able under previous plans to not
Speaker 4: make any payment. Under the new plan, they have to
Speaker 4: make at least a ten dollars payment every month. And
Speaker 4: so my concern is that some folks could go into default,
Speaker 4: you know, over one hundred and twenty dollars.
Speaker 1: And here's another twist. Many of the Americans falling behind
Speaker 1: on their student loans right now aren't even recent graduates.
Speaker 1: Data from the Federal Reserve Bank of New York shows
Speaker 1: that the people now defaulting on their student loans are
Speaker 1: on average two and a half years older than those
Speaker 1: defaulting before the pandemic.
Speaker 3: Folks you know over sixty five are one of the
Speaker 3: fastest growing demographics of student loan borrowers because in some
Speaker 3: cases they've taken out loans for themselves that they haven't
Speaker 3: been able to pay back fully, and then in many
Speaker 3: cases they've taken out loans on behalf of their children
Speaker 3: in their own names, and so you know they might
Speaker 3: be hit with two bills.
Speaker 1: Among geographically, borrows in Southern states such as Louisiana, Mississippi, Alabama, Georgia,
Speaker 1: and South Carolina are disproportionately represented among new defaults.
Speaker 3: We know that black women hold the greatest amount of
Speaker 3: student debt because they have less generational wealth to kind
Speaker 3: of pay up front on their educations.
Speaker 4: Being aware of the huge racial disparities and student loan
Speaker 4: repayment outcomes is something that I would be concerned about.
Speaker 1: And there's another surprising detail. Most of the people now
Speaker 1: defaulting on their student loans were not behind on their
Speaker 1: repayments in twenty nineteen, So why are they struggling now?
Speaker 3: This is like happening in a context of a lot
Speaker 3: of other expenses going up for people. And so if
Speaker 3: you have to make the choice between you know, paying
Speaker 3: for medications in a month, they're paying for food for
Speaker 3: your family, or paying your rent or paying on your
Speaker 3: student loans. You know, I think most people are going
Speaker 3: to choose that other payment that they could make in
Speaker 3: order to kind of keep their family going.
Speaker 1: For millions of borrows, the choice might not be between
Speaker 1: paying and not paying, but between one bill and another.
Speaker 1: So what happens when they simply can't keep.
Speaker 3: Up, They, you know, start reporting that to credit bureaus,
Speaker 3: which then, you know, affects your credit score and affects
Speaker 3: your ability to do all sorts of other things.
Speaker 4: That means it's going to be harder to get a
Speaker 4: car loan, It's going to be harder to get a mortgage.
Speaker 4: It could even be harder depending on where you live
Speaker 4: and what the rules and regulations are. It could affect
Speaker 4: housing applications for renting an apartment, and it.
Speaker 1: Could get even worse.
Speaker 3: The federal government has extraordinary collection powers. They can take
Speaker 3: your tax refund, as you mentioned, they can garnish your
Speaker 3: wages quick explanation.
Speaker 1: Garnish means they can take money right from your paycheck,
Speaker 1: and the US government can garnish up to fifteen percent
Speaker 1: of a defaulted borrow's disposable pay fill minimum wage protections apply.
Speaker 3: That that collection power has been turned off. For five
Speaker 3: years since the pandemic. The Trump administration has delayed that,
Speaker 3: but you know, I think advocates are expecting that any
Speaker 3: day that could happen again.
Speaker 4: It's not clear when that will restart, but that's just
Speaker 4: sort of hanging over folks head as another element of
Speaker 4: uncertainty here.
Speaker 1: What would that look like in practice? Someone taking home
Speaker 1: two thousand dollars after tax could lose up to three
Speaker 1: hundred dollars a month from their paycheck. Well, borrows already
Speaker 1: struggling to make ends meet a significant financial hit, So
Speaker 1: when millions of Americans face the same problem at the
Speaker 1: same time, a lot of people have been wondering, is
Speaker 1: disa warning sign about the state of the wider economy.
Speaker 4: I would take it as something that's independently of concern
Speaker 4: and something to watch. But I think the large increase
Speaker 4: is mostly an artifact of this strange period that we're
Speaker 4: coming out of, and not necessarily an independent signal that
Speaker 4: something is going terribly wrong with the economy. But you know,
Speaker 4: it's kind of going into an economy where there's a
Speaker 4: lot of other uncertainties going on.
Speaker 1: For Amy Solada, the most urgent question right now is
Speaker 1: what happens next.
Speaker 3: The bare minimum would be no turning collections back on,
Speaker 3: which is one of the most devastating you know, things
Speaker 3: that could happen right now.
Speaker 1: So experts don't see this as a warning sign for
Speaker 1: the wider US economy, but for millions of borrows, the
Speaker 1: consequences are very real. Damage credit scores, the threat of collections,
Speaker 1: and hard choices between student loan repayments and other bills.
Speaker 1: Years after the pandemic pause, its effects are still rippling
Speaker 1: through the student loan system. For many borrows, the hardest
Speaker 1: part may be happening right now.