SUMMARY
- Approximately 20% of student loan borrowers exhibit at least one of five identified risk factors as per the Consumer Financial Protection Bureau.
- The recent Supreme Court ruling rejecting federal student loan forgiveness sets the stage for the largest simultaneous borrower repayment in history.
- As the cost of higher education continues to rise, new graduates are advised to visit the federal student aid website to determine their servicer and stay updated.
The Supreme Court's recent decision to overrule President Biden’s proposal for federal student loan forgiveness has placed a great deal of uncertainty and financial distress on student loan borrowers, especially as loan repayments are set to recommence this October.
Approximately one in five of these borrowers demonstrate one or more of five risk factors according to a recent report from the Consumer Financial Protection Bureau, a federal watchdog agency. These risk factors encompass pre-pandemic student loan delinquencies, the need for payment assistance before COVID-19, having multiple loan servicers, other credit product delinquencies since the pandemic began, and new non-medical collections during the pandemic era.
Colton Stedman, a 34-year-old student loan borrower from South Saint Paul, Minnesota, offers a tangible example of such risk. Due to his inability to make his loan repayments, he found himself resorting to financial hardship forbearance, which resulted in interest accrual for up to two years. "It was like taking one step forward and two steps back," Stedman explained.
Stedman, a Pell Grant recipient, expressed his disappointment but not surprise at the Supreme Court's decision. His hopes of having his student loan completely erased by Biden’s plan were dashed. Now, he is preparing to return to his repayments, owing a balance of $19,570 after a three-year pause.
The Supreme Court ruling signals the largest number of borrowers simultaneously entering repayment in history, as per a CFPB spokesperson. Borrowers must brace themselves for the impact on their monthly cash flows, says Jack Wallace, from the student loan refinance company, Yrefy.
Student loan debt, which has been a considerable financial weight for Stedman since his graduation, currently amounts to $1.8 trillion in the U.S., according to the Federal Reserve System. It seems the cost of higher education is persistently escalating. Graduates during the loan suspension period can visit the federal student aid website to identify their servicers and stay informed.
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