July 22, 2024

Why nearly half of student loan borrowers not started repayment

HOUSTON — This year was a roller coaster for student loan borrowers hoping to get loans forgiven, but now it’s time to repay after a three-year pause.

Almost half of student borrowers have not started paying back student loans and an expert said there’s a mix of reasons why. The good news – the Department of Education is giving some grace.

This month, the Department of Education estimates more than 28 million people are returning to repayment.  According to their stats, just 60 percent of 22 million borrowers made payments in November.

“This isn’t entirely unexpected,” said Betty Mayotte, who is president of the Institute of Student Loan Advisors. “We had an historic event which was a three-and-a-half-year pause on student loan payments.”

Mayotte’s non-profit advocates for borrowers. She said the education department has what’s called an on-ramp period through September, which can help borrowers adjust.

“Where they don’t have to worry about delinquencies being reported to their credit bureaus,” she said. “And there are borrowers waiting for their payment, their lower payment options to be processed.”

Mayotte recommends going to StudentAid.gov, where you can find information on re-starting payments, find your loan provider and apply for a payment plan. You could also use the loan simulator.

“The borrowers can plug their information in once and it’ll show them what their payment will be under all the different lower payment options that their eligible for,” she said. “And most importantly, it will show them ow much those plans will cost them over time.”

Mayotte says the other 40 percent of people who haven’t paid yet is not an alarming number. She said the on-ramp program means millions won’t face the consequences of missing payments.

And now that we’re no longer dealing with the uncertainty of the COVID 19 pandemic, Mayotte said borrowers are facing different challenges.

“I think some of them are frustrated or are having trouble getting in touch with their services because of the historic volume related to this repayment restart,” she said. 

Repaying those loans can also impact the rest of your finances. Those loans are part of your debt-to-income ratio which calculates what kind of mortgage you can get if you’re buying a house.

You can find these tools at StudentAid.gov.

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