Biden Erases Default or Delinquency Status with Latest Student Loan Payment Pause

In addition to extending the pause of Federal student loan repayments to August 31, 2022, any borrowers who were in default or delinquency prior to March 2020, will have their status reset when repayment is scheduled to start on September 1, 2022. 

….all borrowers with paused loans to receive a ‘fresh start’ on repayment by eliminating the impact of delinquency and default and allowing them to re enter repayment in good standing

U.S. Department of Education, April 6, 2022

What does this mean? 

Borrowers in default or delinquency can no longer have their credit scores affected, wages or social security garnished, losing the ability to choose a repayment plan, taken to court, or be compelled to pay the entire balance of their loan and compounded interest immediately once in delinquency. 

Nearly seven million borrowers could be affected by the “fresh start” in having their default or delinquency status removed. 

Additionally, with the payment pause, 44 million borrowers will have gained 29 months of 0% interest, some able to pay off portions (or all) their loans, as their payments were applied directly to the principle. Plus for those participating in Public Service Loan Forgiveness (PSLF), the 29 payments will be credited toward their 120 on-time payments, bringing them closer to forgiveness. 

Despite all the governmental intervention, however, analysts, like those at the California Policy Lab , estimate 7.8 million borrowers, about 17% of all borrowers, are at high risk of not being able to repay their loans, when the pause ends.

With nearly 1 in 5 borrowers not able to realize the economic prosperity that’s seemingly promised with a college degree, has the overall value of a college education been diminished

For more information see: Politico.

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About Jill Yoshikawa, Ed M, Partner of Creative Marbles Consultancy

Jill Yoshikawa, EdM, Harvard ’99, a seasoned, 25 year educator and consultant, is meticulous in helping clients navigate all aspects of the educational experience, no matter the level of complexity. She combines educational theory with experience to advise families, schools and educators. A UCSD and Harvard graduate, as well as a former high school teacher, Jill works tirelessly to help her clients succeed.
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