According to a recent analysis conducted by the federal Consumer Financial Protection Bureau (CFPB), one in five borrowers could face difficulties when monthly federal student loan payments resume after more than three years of suspension.
The CFPB report also highlighted that over 1 in 13 student loan borrowers are currently behind on other debt obligations, indicating an increase compared to pre-pandemic times.
The analysis, based on a sample of approximately 32 million borrowers with outstanding federal student loans, identified potential risk factors such as borrower age and the transfer of millions of loans to different servicers.
The report also touched upon President Joe Biden’s proposed debt cancellation plan, which awaits a decision from the Supreme Court by the end of June. Even if the plan is upheld, payments will still resume on any remaining debt later in the summer.
To mitigate the upcoming challenges, the CFPB suggests that borrowers who anticipate struggling should take proactive steps, such as exploring income-driven repayment plans, determining their new loan servicer if changed, and assessing their overall financial situation to create a realistic budget. Failure to meet repayment obligations can have severe consequences, including student loan default, damage to credit scores, and wage garnishment.
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