Federal student loan borrowers haven’t had to make payments on their loans since March 2020, and the pause could continue until the summer of 2023. But even with that pressure off, more of them are struggling, according to a November report from the Consumer Financial Protection Bureau.
“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” Education Department Undersecretary James Kvaal said in a recent court filing.
“A default is really, really bad … and the later [the payment] is, the more damage to your credit score,” says Bev O’Shea, a credit expert and former NerdWallet writer. Listen now and subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | RSS Feed | Omny Studio But will student debt cancellation happen?We won’t know if loans will be canceled until next year.
With forgiveness no longer certain, the White House announced on Nov. 22 that forbearance could extend as far as June 30, 2023 — or end sooner, if the litigation is resolved or the administration is allowed to implement the program. Borrowers will have to start paying student loan bills with interest starting 60 days after the final forbearance expiration date.
“My recommendation to anyone at this point is to log in and see what your monthly payment could be,” says Kristen Ahlenius, director of education at corporate financial wellness platform Your Money Line. “Your monthly payment may be different than what it was at the start of the administrative forbearance; your income might have changed, and you might be able to look into income-driven repayment options.