Student loan borrowers owe $1.6 trillion. Almost half are not paying.

After an unprecedented three-year hiatus in federal student loan payments due to the pandemic, millions of borrowers began repaying their debt when billing resumed late last year. But not nearly as much.

That reality, along with court rulings that regularly change the rules, have complicated the government’s efforts to restart its system for collecting the $1.6 trillion owed to it.

At the end of March, six months after the end of the pause, about 20 million borrowers were making their payments on schedule. But almost 19 million weren’t, leaving their accounts late, delinquent or still on hold, according to the latest Education Department figures.

“The default rate is really emblematic of a system that’s not doing its job,” said Persis Yu, managing counsel for the Student Borrower Advocacy Center, an advocacy group.

Seven million borrowers with federally managed loans were at least 30 days delinquent on their payments at the end of 2023. That’s the highest delinquency rate since 2016, according to the department’s public records. Because of a policy passed by the Biden administration, these borrowers won’t face any penalties for defaulting on their payments until October.

Millions more had their accounts frozen through deferment or forbearance (which allows borrowers to temporarily stop payments), and nearly six million borrowers remain mired in defaults that began before the pandemic.

The reasons why borrowers do not pay are different. Some say they can’t afford it, while others are embroiled in bureaucratic wrangling. Many people are taking advantage of a “on-ramp” period that lasts until September, during which late payments will not be reported to the credit bureaus and borrowers will not be placed in default, although interest will continue to accrue.

When President Biden ended the moratorium that began in March 2020 under President Donald J. Trump, he pledged to fix key parts of the long-borrowed federal program. While the Supreme Court overturned Mr. Biden’s broader policy — forgiving at least $10,000 of debt for each of millions of borrowers — his administration revived other avenues for debt relief.

Mr. Trump’s Education Department blocked aid programs for government and nonprofit workers, borrowers with permanent disabilities and people cheated out of for-profit schools. Under Mr. Biden’s leadership, the agency revamped and expanded those and other initiatives and used them to cancel $167 billion in debt from nearly five million people.

Mr. Biden also created a new repayment program, SAVE, which lowered many borrowers’ payments or reduced them to zero for millions of low-wage workers. Consumer advocates hailed the moves as vital to ensuring borrowers’ bills are manageable.

But a flurry of changes to repayment rules and a flurry of lawsuits from Republican-led states attacking them have worsened the already challenging task of getting more than 40 million people back on track. The Department of Education and its five loan officers are scrambling to adjust their systems and guide borrowers through repayment options that sometimes change overnight.

Last week, federal judges in Kansas and Missouri temporarily blocked elements of the SAVE program, ruling in favor of states that challenged the president’s authority to impose such generous terms without congressional approval. In the Kansas lawsuit, the states called the president’s debt relief maneuvers “a product of a rush to do evasively what the Supreme Court already told the defendants they could not do.”

But on Sunday, the U.S. Court of Appeals for the 10th Circuit temporarily overturned the Kansas decision, clearing the way for the department to proceed with planned payment reductions this month for millions of borrowers.

Travis Wattles, 39, has been saddled with his bill since the pay freeze ended in the fall because his utility, Aidvantage, has been unable to determine how much his monthly bill should be. (Aidvantage declined to comment and referred questions to the Department of Education.)

Mr Wattles, who works in the marketing of automotive products, spent several years overseas. During that time, his income was below the limit for the foreign earned income exclusion (a tax break that shelters some income), so he had no taxable income and owed nothing on his student loan debt .

But Mr. Wattles, who moved near Nashville in early 2020, now has a six-figure salary. He enrolled in the SAVE plan in August and has sent documents to Aidvantage twice to recalculate his payment based on his current income.

“They keep putting me back into sobriety because they can’t figure it out,” he said. “I don’t want this. I don’t mind making a payment; I understand that I received the loan.”

Karlyn Granger, a 36-year-old graphic designer, earned her master’s degree in 2019. When the pandemic freed her from having to pay her federal loans, she got married, bought a house in Atlanta, and had a child. The cost of caring for her family eats up most of her paycheck and “feels much more present and terrifying” than her credit, she said.

A deluge of emails from Aidvantage has fueled her efforts to figure out which payment plan is best for her. But the choices confuse her: Should she try to keep her monthly bill as low as possible, or prioritize paying more to lower what she owes in interest?

The changing legal landscape has reinforced her uncertainty. The SAVE plan, for example, waives unpaid interest for those who keep up with their monthly payments and forgives any remaining debt after 20 years. But those benefits could disappear if legal challenges to the plan succeed. And the Internal Revenue Service usually treats forgiven debts as income. Mrs. Granger fears making a decision that could end up costing her a huge tax bill.

“I’m just kind of in analysis paralysis, where I don’t do anything,” she said.

The Department of Education predicted that millions of borrowers would need extra time, help and incentives. There is no historical parallel for stopping the entire credit system for years. But when natural disasters have occurred — which affected borrowers can use as a basis to temporarily suspend their payments — “roughly one-third of borrowers missed their payments in the first months after resuming payments,” the two wrote. senior officials in an April blog post. “Their payment rates gradually recovered over a period of two to three years.”

For loan servicers, alarm bells start ringing when a borrower is more than 90 days delinquent, said Scott Buchanan, executive director of the Student Loan Servicing Alliance. This is the point at which they usually file a negative credit report. But until September, servicers have been instructed to put those borrowers on hold instead.

This complicates the data. With so many borrowers automatically going into forbearance, it’s hard to separate those who can afford to pay but choose not to from those who are truly struggling.

“For a while, we’re going to have this group of borrowers who are going to see, ‘I went into delinquency and nothing happened,’ so they think, ‘Why am I making a payment?'” Mr. Buchanan said. always ramp risk. You want to encourage people to make payments. If you self-heal for them, that doesn’t encourage payments.”

Mr. Biden often touts his approach to student debt as a signature achievement. “My administration has taken the most significant action to provide student debt relief ever in the history of this country,” he said in April. “This relief can be life-changing.”

And for millions, it has been, despite the shock and legal turmoil of the past year.

Clayton Lundgren, 25, earned a master’s degree in engineering physics in 2021 — then moved to Los Angeles to work as a self-employed content creator. If the Supreme Court had allowed Mr. Biden’s massive debt cancellation program to stand, nearly half of the $21,000 Mr. Lundgren owed would have disappeared.

But because of the SAVE program, which excludes income up to 225 percent of the federal poverty line, Mr. Lundgren has no debt on his monthly loan bill. This helps him afford the rent and other living expenses. “It gives it some breathing room,” he said.

And because SAVE prevents interest from accruing, Mr. Lundgren isn’t growing up. That’s a stark change from how federal student loans used to work: Previously, millions of borrowers on income-based plans made payments each month, but saw their tabs grow because their payments weren’t enough to not even cover the interest of their debts.

Mr. Lundgren said he was grateful for SAVE, but also felt a little battered by the twists and turns of the credit system.

“I’m just resigned to the fact that there is almost no reality where the socially just thing happens, which would be loan forgiveness and universally affordable public college,” he said.

Representative Virginia Foxx of North Carolina, a Republican and chairwoman of the House Committee on Education and the Workforce, praised the court’s rulings against the SAVE plan.

Mr. Biden “has chosen to give away taxpayer money and illegally rewrite loan agreements,” she said. “It’s a blatant attempt to buy votes from graduates at the expense of the working class.”

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