Millions of student loan borrowers behind on payments leading to economic concerns

From Yahoo Finance: 2025-05-29 17:24:00

As student loan borrowers resume payments, credit scores are plummeting due to a surge in delinquencies, impacting over 2.2 million borrowers significantly. Economists warn of potential economic repercussions as borrowers face difficulty securing loans or making major purchases. The pandemic-era payment pause has ended, leading to confusion and financial strain for many.

The Federal Reserve Bank of New York reports nearly 1 in 4 student loan borrowers are behind on payments, attributing much of the surge to confusion surrounding the restart of payments. This confusion, coupled with financial hardships, has led to a significant increase in delinquencies, affecting millions of borrowers.

Efforts to forgive student loan debt have been unsuccessful, leading to increased financial strain on borrowers. The resumption of student loan payments is impacting borrowers’ credit scores, with some facing significant drops that hinder their ability to secure affordable loans or housing.

Economists anticipate a negative impact on the economy due to sinking credit scores and resumed student loan payments. Increased loan payments could lower GDP growth, presenting another challenge for consumers already facing financial difficulties. The Education Department provides options for borrowers in default, including repayment plans and loan rehabilitation.

Borrowers are urged to explore income-driven repayment plans and seek forbearance while awaiting approval. Options to get out of default include loan rehabilitation or consolidation, with accrued interest potentially increasing overall repayment amounts. The impact of resumed student loan payments extends beyond individuals, potentially affecting the broader economy.



Read more at Yahoo Finance: As millions miss student loan payments, here’s how it could hurt the economy