GAO: Nearly 30% of Borrowers Were Past Due on Their Payments
By Maria Carrasco, NASFAA Staff Reporter
A new report from the Government Accountability Office (GAO) takes a look at how borrowers are faring after the resumption of student loan repayments in October 2023, finding that nearly 30% of borrowers – 9.7 million – were past due on their payments and accounted for $290 billion in outstanding loans.
The report from GAO focuses on monthly summary data from October 2023 through January 2024. As of this January, the Department of Education (ED) held $1.5 trillion in federal student loans for nearly 43 million borrowers.
Of those 43 million borrowers, about 40% of borrowers – 13.3 million –- were current on their payments and had scheduled payments of more than $0. Additionally, about 14% of borrowers – 4.5 million – were current and scheduled to pay $0 on an income-driven repayment (IDR) plan.
GAO noted that ED reported in January that nearly 6.7 million borrowers had been “shielded” from negative credit reporting since monthly payments resumed. As part of the resumption of student loan repayment since the COVID-19 emergency, ED is not currently reporting borrowers as delinquent to credit reporting agencies for the first 12 months of repayment resumption. ED is set to start reporting delinquencies in September 2024.
GAO also found that 10% of borrowers were in deferment and 7% were in forbearance in January, totaling roughly $254 billion in federal student loans.
The report also examined how many borrowers were enrolled in the Saving on a Valuable Education (SAVE) repayment plan. In January, 7.3 million borrowers were enrolled in SAVE. Among the 6.2 million borrowers enrolled in SAVE, who had scheduled monthly payments, nearly 60% – 3.6 million – were scheduled to pay $0.
However, the SAVE plan is currently facing legal challenges, with the 8th U.S. Circuit Court of Appeals blocking ED from further implementing the plan in August. The Department of Justice last week filed an emergency application with the U.S. Supreme Court to cancel the Eighth Circuit Court of Appeals’ injunction of the SAVE Plan.
GAO said it conducted this report in response to a request from Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, and Sen. Bill Cassidy (R-La.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, to examine borrower repayment practices following the expiration of the student loan payment pause.
Foxx responded to the GAO report, saying that a majority of borrowers “don’t believe they need to pay back the loans they knowingly took on” and criticized ED for its student loan forgiveness initiatives.
“It’s past time for this administration to quit lying to the American public and focus on real solutions to deal with the cost of postsecondary education, like the College Cost Reduction Act that will hold institutions financially responsible for overpriced degrees that leave students with unaffordable debt,” Foxx said in a statement.
Additionally, Cassidy said the Biden administration is “misleading borrowers to win their vote” and “setting them up for failure.”
“These borrowers are racking up interest with missed payments while waiting for the false promise of widespread debt ‘cancellation’ this administration has no legal authority to deliver,” Cassidy said in a statement. “Let’s be clear, the Biden-Harris administration is not canceling debt. They are trying to take the debt from those who willingly took it on and transfer it onto the 87 percent of Americans who chose to not go to college or already paid off their education.”
Publication Date: 8/22/2024
Korinne P | 8/22/2024 4:47:09 PM
I would be interested to know how much of this lack of payment is due to borrowers simply not paying versus being thoroughly confused about when, how, and how much they are supposed to pay. As I understand it, servicers send notice after notice, often contradicting previous communications due to the ongoing changes surrounding repayment.
Nedi G | 8/22/2024 12:51:02 PM
This process is certainly going to be very, very messy over the next 2-3 years but the end result is they will either get to cancel a significant chunk of this debt or change CDR eligibility rules.
Jeff A | 8/22/2024 8:50:16 AM
What will be the impact on CDRs when they return to full maturity again?
Will we see a lot of schools go over the 30% threshold and lose eligibility?
I thought many would see their rates increase 30% meaning if they were over 20%, they may rise to over 30%. That may be a conservative estimate given this data.
The narratives and promises around debt forgiveness, debt relief and repayment plans are no doubt causing serious harm to the student loan program.
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