According to the Department of Education, nearly 20 million student loan borrowers in the United States are currently not making payments on their debts. As of now, approximately 43 million borrowers owe a combined total of more than $1.6 trillion in student loan debt, with the average borrower owing around $28,950.
From March 2020 until September 2023, payments and interest accrual on federal student loans were paused due to the COVID-19 pandemic. While nearly 20 million borrowers resumed their scheduled payments after this pause ended, approximately 19 million borrowers have yet to resume making payments, effectively keeping their loans in a state of pause.
The data reveals that nearly one-third of all federal student loans have been in default at some point. Typically, a borrower is considered to be in default when a payment has not been made for 270 days, or nine months. The majority of student loans, about 92%, are federal, while the remaining 8% are private loans. Younger borrowers tend to have lower balances, while those aged 62 and older have higher balances, averaging around $49,375.
In August 2022, the Biden Administration proposed the cancellation of more than $400 billion in student debt for millions of Americans. As part of this effort, the administration introduced the SAVE (Saving on a Valuable Education) plan, which includes provisions to cancel up to $10,000 in student loan debt for borrowers earning less than $125,000 annually. The SAVE plan also ensures that borrowers will not see their balances increase due to unpaid interest.
As of now, nearly 8 million borrowers have enrolled in the SAVE plan. Among these, 4.5 million borrowers have a monthly payment of $0 under the plan, while an additional 1 million borrowers have monthly payments of less than $100. This initiative aims to provide significant relief to borrowers, helping them manage their debt more effectively and avoid the pitfalls of default.
The ongoing challenges of student loan repayment highlight the critical need for comprehensive reform in the higher education financing system. The Biden Administration’s efforts, including the proposed debt cancellation and the SAVE plan, represent significant steps towards addressing these issues and providing relief to millions of borrowers.
