Months ago, millions of borrowers resumed making payments after a three-year federal student loan payment break due to the outbreak of COVID-19 pandemic. However, nearly the same number did not. This has complicated government attempts to collect $1.6 Trillion worth of loans owed.

Rising Delinquencies

As per the Department of Education, by March end, almost 20M borrowers were paying on time whilst more than 19mn were in default or delinquent or continued pause. Persis Yu from advocay group Student Borrower Protection Center said: "Nonpayment rate really is emblematic of a system that's not doing its job." 

The highest delinquency rate since 2016 happened at the year-end 2023 with seven million who are at least 30 days past due on their account. These borrowers have no late fees until October as per policy issued by Biden administration.

Financial and Bureaucratic Hurdles

Many borrowers face financial difficulties or other issues regarding bureaucracy. A few take advantage of an 'on-ramp' through September where delayed payments do not get reported to credit bureaus but still accumulate interest.
The moratorium was terminated by President Biden and he vowed to fix it as such for federal loan programs.

By cancellation $167 billion owed by almost 5 million people, his administration initiated Saving on a Valuable Education (SAVE) program that will reduce or eliminate payment for low-wage earners. Nevertheless, this task got complicated because there were legal suits from Republican states.

READ ALSO: Biden Administration Introduces Sweeping Relief Plan For Over 26 Million Student Loan Borrowers, Prioritizing Economic Equity And Opportunity 

But changes in payment regulations as well as litigations brought forth by Republican-dominated states have complicated strategies aimed at helping over 40 million people to get back on track with payments. Parts of the SAVE program were recently blocked by federal judges in Kansas and Missouri; however, a temporary reversal of the Kansas ruling was done by the US Court of Appeals for the Tenth Circuit which allowed planned reductions in payments to go forward.  

Future Outlook

The Education Department projected that millions would need extra help when they restart their payments. The challenge lies in identifying those who can comfortably pay but opt not to, and those truly struggling. President Biden's measures such as the SAVE program aim at providing relief; however, ongoing lawsuits and system changes cause uncertainty for borrowers.

The path forward remains complicated for federal student loan repayment since both borrowers and the system are still adjusting as they face resumed payments against a backdrop of legal and bureaucratic changes. 

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