The lifting of the pause on student loan payments could result in a tidal wave of defaults as borrowers struggle to make payments that have been waived for more than three years.
A new report from the Consumer Financial Protection Bureau suggested that as many as 20% of borrowers, nearly 6 million people, carry risk factors that could lead them to default on their loans when payments resume this fall. The Department of Education has announced that interest accumulation will begin in September, and payments will be due beginning in October.
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Student loan payments and interest accumulation have been paused since March 2020 due to the coronavirus pandemic. The Biden administration has tried to enact a loan cancellation plan that would see borrowers making less than $125,000 have up to $20,000 in federal loans forgiven.
The plan has been tied up in court challenges since its announcement last year, but a Supreme Court ruling on the case’s legality is expected before the end of June. Education Secretary Miguel Cardona has said the cancellation plan is necessary to alleviate the risk that borrowers will default when payments resume.
The CFPB report …