People walk on the campus of the University of Southern California (USC) on March 21, 2024 in Los Angeles, California.
Mario Tama | Getty Images
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.
After the Covid-era pause on federal student loan payments lapsed in September 2023, the Biden administration offered borrowers a 12-month “on-ramp” to repayment. During that time, borrowers were shielded from most of the consequences of falling behind on their payments. That relief period concluded on Sept. 30, 2024.
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.
A new student loan delinquency can cause a borrower’s credit score to drop more than 150 points, the Fed warns.