Dec 22, 2023 - Politics & Policy

Millions of debtors have not yet made their first student loan repayment

Illustration: Tiffany Herring/Axios

A narrow majority of the 22 million student loan borrowers with an installment due immediately upon resumption have made their first payment, per the Department of Education.

Why it matters: Months into the restart of student loan payments after a years-long pandemic pause, the process continues to confuse borrowers.

By the numbers: 60% of student loan borrowers with payments due in October made those by mid-November, according to data released this month by Under Secretary of Education James Kvaal.

  • This leaves nearly 9 million borrowers with restarted debts who did not pay.

Yes, but: The 12-month on-ramp period safeguards borrowers until the fall.

  • "Until next September, borrowers will be protected from the harshest consequences of missed payments, such as delinquency, default, and mandatory collections," Kvaal wrote.

Zoom out: More people have flocked to the Student Debt Crisis Center, a nonprofit organization, with questions since payments resumed than before the pandemic, said Natalia Abrams, president and founder.

  • The organization recently designated a dedicated employee to handle all responses to questions from lost borrowers because the influx became overwhelming, even from people within the industry.

Zoom in: The center's managing director, Sabrina Calazans, was put into an administrative forbearance (paused repayment with 0% interest) after applying to the SAVE Plan, President Biden's administration's income-driven repayment plan.

  • She couldn't understand why — even with the knowledge she has from working for the organization.
  • "I was on time with everything," she said. "I was confused. I was not told why I was being put into a forbearance."

What's next: Additional SAVE plan benefits will start next July, including:

  • Cutting undergraduate loan payments from 10% of discretionary income to 5%. "That could be a time that could entice more borrowers to enter repayment because they see their payment as half of what it is right now," Abrams said.
  • Forgiving remaining balances of people who have been making payments for 10 years with original balances of $12,000 or less.
  • Credit for loan consolidation.
  • Automatic credit toward forgiveness for specific periods of deferment and forbearance.

Between the lines: Borrowers who took out Parent PLUS loans don't immediately quality for the SAVE plan, but can consolidate it with other federal loans to access it.

  • Through a time-consuming "double consolidation" process, borrowers can lower their payments.
  • The deadline for consolidating to access SAVE is July 1, 2025, according to a guide from the Massachusetts Attorney General.

Of note: The Biden administration has relieved almost $132 billion of debt for more than 3.6 million borrowers, and is crafting rules to provide further relief.

  • But young voters feel he has done "too little" regarding student loans, according to survey results this month.

Go deeper: What's going on with student loan relief

Go deeper