Student Loan Default Rates Could See a ‘Historically Large Increase’ if Relief Program isn’t Reinstated, Biden Admin Warns in Court Filing

After the Biden administration stopped accepting applications for its student loan relief program last week after a federal district judge in Texas struck down its plan, calling it “unconstitutional,” a new court filing warned that student loan default rates could see a “historically large increase” if the relief program isn’t reinstated.

U.S. Department of Education Under Secretary James Kvaal insisted in the filing that “Unless the Department is allowed to provide debt relief, we anticipate there could be a historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic.”

“This could result in one of the harms that the one-time student loan debt relief program was intended to avoid,” Kvaal added.

Twitter user Rob Pagan responded to the suggestion that he believes we should “Let that fall on the students and NOT the American taxpayer.”

Let that fall on the students and NOT the American taxpayer 🤷‍♂️🤔

— Rob Pagan (@TheRealRobPagan) November 16, 2022

A USA Today article today reported that experts say since it’s unlikely millions of Americans will get student loan forgiveness by year-end, they should prepare (and quickly) to start repaying again.

Brian Marks, executive director of the Entrepreneurship and Innovation Program at the University of New Haven said, “I’m telling people to expect to start paying again.”

A resolution could take months and certainly won’t come by year-end when the student loan repayment pause expires, according to the USA Today article as well.

Marks also pointed out that there’s not a lot of time between now and when the pause on student debt repayments expires on Dec. 31, but people need to “get their financial house in order.”