Some Americans are years behind on paying back their student loans
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What record number of borrowers are now in student loan default?
A record number of student loan borrowers have fallen into default with more than twenty percent of federal borrowers over a year behind on their debt. For more on what's going on, we turn to the KCBS Ring Central newsline to speak with Bloomberg's Liam Knox. Thank you so much for being with us this afternoon.
Thanks for having me.
Absolutely. Um, let's talk about the numbers. How many people are behind in their payments right now?
Well right now a a a record nine point one six million Americans are in default on their student debt, meaning that they've gone a year or more uh since making their last payment, but even more are in various states of delinquency, uh ninety days or more behind on their last payment, bringing the the total to around twelve million uh Americans. uh in some form of delinquency on their student loan debt. That's twelve million out of a total forty three million Americans with federal student loan debt. Uh a pretty big chunk of the total pie there.
What is going on here?
How did pandemic‑era payment pauses contribute to rising default rates?
Well, uh the default rates have been rising ever since uh the pandemic, um when there were kind of uh widespread pauses on repayment and on collections uh as Americans kind of adapted to a new reality. That continued under the Biden administration, um, which uh implemented some more uh forgiving repayment programs um uh allowed for for again sort of kind of continued to the the pause for a lot of uh borrowers. When Donald Trump took office again last year, he uh ended a lot of that very quickly. He restarted collections i in May for the first time since twenty twenty, uh started cracking down on borrowers. um uh has has kind of uh put into place a lot more stringent repayment policies. In addition, uh, you know, new
New repayment programs that just next month are gonna be replacing some of those former Biden era repayment options like the save plan, uh uh often with kind of higher uh interest rates associated with them. And you're seeing a lot of borrowers uh kind of both uh struggle to adapt to the new reality of a of a more stringent collection uh federal collection environment, but also uh deal with a lot of confusion about which program they're enrolled in and when they are they're whether or not they actually do owe payments. Uh there's been a lot of chaos in this space recently and it's showing in the default rates.
Oh, what about the um in incentives uh for the repayment um that are going to occur where you can actually lower your interest rate?
What new repayment incentives are the Trump administration offering?
Yeah, one of the things the education department announced just today is that they're going to be uh lowering interest rates temporarily even further for American borrowers that uh enter into the enroll in the auto pay system under the new Trump administration repayment plan. So uh in the past, uh anyone who enrolls in autopay for their student loan debt um has always been entitled to a point two five percentage point reduction of their rate. Now that's gonna go up to one per a one percentage point reduction uh in borrowers rates. And that's only valid for the next two years and in uh borrowers have to hop on that within the next three months in order to take advantage of it. But it's meant to incentivize more repayment, get get Americans
um, you know, out of default, out of delinquency and and try to get back on some sort of a payment plan. And it's also meant to uh encourage quicker uh enrollment in these new repayment options, which again often have higher rates. um but which uh then the Biden era plans but which are going to kind of slowly subsume the former repayment environment over the next few years regardless.
It seems like such a huge problem.
Can borrowers avoid wage garnishment and how does it work?
Uh do you have any other um you know, demographic uh information? I'm talking about like age in particular. Uh people who are defaulting on their loans because is it true that they can garnish your social security if you have federal loans and you haven't paid 'em back?
They talked about doing that last year. Um they never uh they actually pulled back on that plan. Uh they a they talked about garnishing not just social security but also uh um paychecks, wages.
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Chapters
6 chapters
1
What record number of borrowers are now in student loan default?
0:00–1:03
2
How did pandemic‑era payment pauses contribute to rising default rates?
1:03–2:38
3
What new repayment incentives are the Trump administration offering?
2:38–3:51
4
Can borrowers avoid wage garnishment and how does it work?
3:51–4:46
5
Which bills do delinquent borrowers prioritize over student loans?
4:46–5:59
6
How have default numbers jumped from six to nine million this year?
5:59–7:07
Speakers
1 identifiedMore from KCBS Bloomberg Tech and Business Report
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