This really shouldn’t be a surprise to anyone, but there it is. After years of ‘forbearance,’ ‘different ‘forgiveness’ carrots for votes, ‘on-ramps’ and warnings that the day was coming when these loans would come due, many holders of student loan debt held out that it would all just go away.
All it did was grow while they waffled.
The Biden administration, after numerous failures in their schemes to eliminate all student loan debt – while wildly successful for some lucky borrowers – gave most of those who owed what they called an ‘on-ramp.’ It was a twelve-month grace period that started in 2023, which protected delinquent borrowers from the worst effects and gave them time to bring their loan status up to snuff before consequences kicked in.
When federal student loan payments finally restart in the fall, the Biden administration will offer borrowers some elbow room.
The U.S. Department of Education will institute a 12-month “on ramp” to repayment, which will run from Oct. 1, 2023, to Sept. 30, 2024. During that period, borrowers will be shielded from the worst consequences of missed payments.
Borrowers may need that leeway: The Consumer Financial Protection Bureau recently warned that roughly 1 in 5 student loan borrowers could struggle when their payments resume.
That grace period was up in October of 2024.
Now, the numbers are just starting to come in for how many student loans are already behind.
Around 9.7 million student loan borrowers became past due on their bills after the Covid-era payment pause expired, according to a new estimate by the Federal Reserve Bank of New York.
…By the end of the off-ramp period, the New York Fed estimates that the volume of past-due federal student loans hit 15.6%, with more than $250 billion in delinquent debt.
“According to these numbers, it is reasonable to expect student loan delinquency to surpass pre-pandemic levels when new delinquencies hit credit reports,” the Fed’s report says.
And this might well be one thing that the delinquent borrowers hadn’t really considered yet. Because the entire time that the Biden administration tinkered with the loan programs, coming up with scheme after forgiveness scheme, every last credit score that should have rightfully been in the toilet over the missed payments was doing nothing but going up.
The government had a hand in that, too.
…The pandemic forbearance on federal student loans naturally had a rather large impact on credit scores for affected borrowers. Page 8 of the Student Loan Update shows an 11-point increase in median credit scores for student loan borrowers from the end of 2019 to the end of 2020; however, these increases were particularly large for borrowers who had a previous delinquency…
…The 2020 forbearance marked all delinquent (but not defaulted) loans as current, causing a jump of 74 points, from 501 to 575, in the median score between 2019:Q4 and 2020:Q4 for those borrowers who were previously delinquent but not defaulted. Since then, scores continued to rise for previously delinquent borrowers (as their negative remarks aged) while scores for previously current borrowers remained relatively flat.
Defaulted borrowers saw a gradual rise in credit scores as their negative marks aged and as some borrowers voluntarily rehabilitated their defaulted loans. However, in the fourth quarter of 2022, the Fresh Start program marked all defaulted loans as current, increasing the median score for those with a default in 2019 by 44 points, from 564 in 2022:Q1 to 608 in 2023:Q1. By the end of 2024, those borrowers with loans in delinquency or in default saw scores that were 103 and 72 points higher, respectively, than at the end of 2019…
Many of these loans were still in subprime territory, but just barely. Had they used the on-ramp to cure their loans, they might well have been able to boost those scores legitimately by paying on time.
But a funny thing happened with the grace period – more loans became delinquent.
… As discussed above, the delinquency rate fell at the start of the pandemic as loans were cured and due to the Fresh Start program. After payments resumed, the volume of past due federal loans quickly returned to pre-pandemic levels and reached a new high of 15.6 percent by the end of the on-ramp period, with more than $250 billion in delinquent debt held by 9.7 million borrowers.
Now, as the 90 days past-due notice approaches, credit scores can drop as much or more than 150 points, particularly the higher your credit score to begin with.
…New student loan delinquencies have been shown to take massive bites out of credit scores, with deductions averaging 87 points for subprime borrowers and steep 171-point knocks for those with superprime, or excellent, credit standing.
That score drop will affect everything going forward, from renting a new house to, possibly, even a job interview.
“Significant Drops”: Over 9 Million Credit Scores Set For Triple-Digit FICO Disaster As Student Loans Hit Reports https://t.co/3PQ6ZWH2b5
— zerohedge (@zerohedge) March 26, 2025
There are also borrowers whose repayment terms have been drastically refigured – and not in their favor – as changes occur within income-driven repayment programs.
…“My payment is going to quadruple,” said Ally Rooker in a viral TikTok video. Her monthly student loan payment for her public health degree is set to jump from $250 to $900.
Last month, a federal judge struck down the Biden-era SAVE plan, a repayment program used by 8 million borrowers, ruling that the administration lacked the authority to forgive certain student loan debt. In response, the Trump administration paused all applications for income-driven repayment plans and loan consolidation, leaving many borrowers in limbo.
…Another borrower took to TikTok to share how her husband’s monthly payment jumped tenfold, from $500 to nearly $5,000.
“It’s an obscene amount and a huge portion of our income each month,” she said.
That $5000 a month is going to pay off dental school loans.
Of course, everyone is pissed at Trump for pausing the program the judge struck down. Go figure.
But the administration had to get the program to comply with the ruling, and they’ve just reopened it.
The U.S. Education Department reopened online applications Wednesday for income-driven repayment plans for student loan borrowers.
…The Trump administration needed to revise the income-driven repayment plan application in order to comply with the February ruling, said James Bergeron, acting under secretary at the Education Department. While the online application was down, officials said there were no disruptions to the paper application process.
If someone got a degree that was worth the paper it was printed on and is lucky enough to have a job to be able to pay off the loans, good for them. But too many of these monstrous debts have gone to pricey schools for degrees that have little hope of positions paying enough ever to be able to pay back the tuition.
Then there are the clowns whom we all pay for eventually one way or the other.
There are countless people like this going into student loan debt to receive an anti-education. This cannot be allowed to continue, because a future where all these people are gainfully employed applying their “expertise” is a very dark one indeed.pic.twitter.com/DLtqA0hWBb
— Colin Wright (@SwipeWright) March 20, 2025
The numbers are obscene, as are the endowments of the colleges who benefitted from all of this without any skin in the game.
The time to have addressed the loans was to have been paying them all along if you could, especially when they paused the payments.
But with an economy showing weakness, every good-paying job is needed, as is as rock-solid a credit score as one can manage.
20/20 hindsight can be expensive.
