Student borrowers could see credit scores drop for late loan payments
Nearly 9.7 million student loan borrowers face significant drops in credit scores. This follows the end of the pandemic-era pause on payments.
The impact on credit access depends on which borrowers are missing payments.
The Federal Reserve anticipates a significant increase in student loan delinquencies in the first quarter of 2025, though the exact extent of the impact remains uncertain.
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The pandemic has upended the student loan landscape, affecting loan growth, repayment rates, and delinquency rates. Now, the Federal Reserve Bank of New York warns that these changes are significantly impacting borrowers’ credit scores.
Debt reaches pre-pandemic levels
Nearly 9.7 million borrowers hold about $250 billion in delinquent debt, a number that has climbed back to pre-pandemic levels after student loan payments resumed. According to the Federal Reserve, this same group of borrowers is expected to see substantial drops in their credit scores, with some facing declines as steep as 150 points by the first quarter of 2025.
With the end of the COVID-era pause on student loan payments, borrowers no longer have the shield protecting them from the financial consequences of missed payments. The impact on credit access will depend largely on which borrowers are falling behind.
If it’s mostly those with lower credit scores, the effect will be less pronounced since these borrowers already have limited access to credit. However, if higher-credit borrowers miss payments, the consequences could be far more significant, with lower credit limits, higher interest rates and reduced access to credit overall.
End of relief period
The pandemic forbearance had a significant impact on borrowers’ credit scores, especially for those who were already delinquent or in default. As borrowers begin to miss payments again, delinquencies will appear on credit reports once payments hit 90 days past due.
The ban on negative credit reporting for student loans ended in September 2024, signaling the close of the relief period under the Biden administration.
The Federal Reserve is expecting to see a notable increase in student loan delinquencies in the first-quarter 2025 report on household debt and credit. However, it’s still difficult to predict exactly how significant the spike will be.
How the Department of Education spent $268 billion last year
President Donald Trump has issued an executive order aiming to do away with the Department of Education. The president has been critical of the state of education in the U.S. and the agency’s influence.
The agency is relatively new, but its origins go back to 1867. If the president succeeds, it would mark the second time the Department of Education has been shut down.
The Department of Education spent more than a quarter of a trillion dollars in fiscal year 2024, accounting for 4% of all federal government spending.
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President Donald Trump signed an executive order that takes steps to dismantle the Department of Education on Thursday, March 20. The move culminates decades of efforts by Republicans to shut down the agency, and will take an act of Congress to permanently close it.
Trump’s latest order builds on a promise he made on Inauguration Day.
“We have an education system that teaches our children to be ashamed of themselves, in many cases, to hate our country, despite the love that we try so desperately to provide to them,” Trump said during his inaugural address in January. “All of this will change, starting today, and it will change very quickly.”
The agency has been shut down before
The current Department of Education has technically only existed since 1980, but its origins date back to 1867.
President Andrew Johnson created the first Department of Education to collect information and statistics about schools throughout the country. However, because some worried it would have too much control over local schools, the government downgraded the agency to the Office of Education a year later.
Starting in the 1950s and continuing into the late 1970s, countless factors contributed to the expansion of federal education funding. In October 1979, Congress passed the Department of Education Organization Act, which consolidated several federal agencies. The Department of Education officially reopened its doors in May 1980.
What’s the Department of Education’s purpose?
“The mission of the Department of Education (ED) is to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access for students of all ages,” the agency website reads.
The Department of Education essentially oversees education policy and provides funding for programs and individuals in need.
Globally, the U.S. ranks ninth in reading, 16th in science and 24th in math, according to the latest figures from the Program for International Student Assessment.
How much does the department spend in one year?
For fiscal year 2024, the Department of Education’s gross cost for its programs and operations reached roughly $252 billion. Total outlays, which account for certain spending adjustments, totaled $268 billion.
The expenditure accounts for a total of 4% of federal government spending for the year.
The Department of Health and Human Services takes 25.4% of the total budget due to Medicare and Medicaid costs. The Social Security Administration makes up about 22.4% of the budget, while the Treasury Department takes up 19.5%. The Department of Defense comes in at 13.5%, followed by Veterans Affairs at 4.8% and then the Department of Education at its 4% mark.
Sixty percent, or $160.7 billion of the budget goes straight to the office of Federal Student Aid. The higher education chunk pays for Pell Grants, work-study programs and loans.
White House press secretary Karoline Leavitt said Thursday, March 20, the department would continue managing federal student loans under Trump’s action.
Roughly 25%, or $68.1 billion, gets transferred to states. Another $39.9 billion goes to elementary and secondary education grants.
The department sent $18.8 billion to schools with a large number of poor, neglected or “educationally disadvantaged” students; it spent $15.5 billion on special education programs across the country and it allocated $5.5 billion to general school improvement programs, like after-school programs and classroom technology.
How do states benefit from Department of Education money?
The agency provided roughly 14% of funding for the nation’s public schools in fiscal year 2022, according to the most recent Census data. Not all of that federal funding comes from the Department of Education — some of it supports school meals from the Department of Agriculture — but the majority is Department of Education funding.
The state that received the largest share of its funding from the federal government is Mississippi at 23.3%, according to a Pew Research Center analysis. Mississippi was followed by South Dakota, Montana and Alaska. As far as individual school systems go, Detroit receives nearly 50% of its funding from the federal government.
Federal appeals court blocks Biden’s student loan forgiveness plan
A federal appeals court blocked former President Biden’s student loan forgiveness plan, known as the SAVE Repayment Plan. The court ruled that the education secretary exceeded their authority by designing a plan that forgave loans.
Missouri Attorney General Andrew Bailey called the decision a significant precedent, ensuring future presidents cannot “force working Americans to foot the bill for someone else’s Ivy League debt.”
According to higher education research group The Institute for College Access and Success, the court’s ruling could force borrowers to make higher monthly payments than they’re currently responsible for.
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A federal appeals court on Tuesday, Feb. 18, blocked former President Joe Biden’s student loan forgiveness plan, known as the SAVE Repayment Plan. The plan could have lowered monthly payments for student loan borrowers while placing them on an income-driven repayment plan.
Under SAVE, the government would have also paid for any monthly accrued interest left over after a full monthly payment was made.
Seven Republican states filed a lawsuit against the plan.
Tuesday, a three-judge panel for the 8th U.S. Circuit Court of Appeals ruled Biden’s secretary of education had exceeded their authority “by designing a plan where loans are largely forgiven rather than repaid.”
The ruling states that the education secretary has the power from Congress to create repayment plans in which the loans are repaid but not forgiven.
Missouri Attorney General Andrew Bailey, who led the litigation, said on X that while the ruling doesn’t change the fact President Donald Trump wouldn’t follow through with the program, the ruling sets an important benchmark for future administrations.
Bailey added, “This precedent is imperative to ensuring a president cannot force working Americans to foot the bill for someone else’s Ivy League debt. Huge win.”
The Institute for College Access and Success (TICAS) argues that the court’s ruling could pave the way for a student loan overhaul that would increase borrowers’ monthly payments by as much as $200, on average. The group points to a piece of legislation written in January 2024 by Rep. Virginia Foxx, R-N.C., who served as the chair of the House Committee on Education and Workforce.
According to TICAS, Foxx’s bill would “make student loan repayment more expensive for millions of borrowers, limit access to federal student loans, and roll back regulations intended to hold institutions accountable for how well they serve students.”
According to the University of Pennsylvania’s Penn Wharton Budget Model analysis, the SAVE plan was estimated to cost taxpayers as much as $475 billion over a decade.
In 2023, the U.S. Supreme Court ruled 6-3, blocking Biden’s previous student loan forgiveness plan that would have canceled upwards of $400 billion in student loans for nearly 43 million Americans.
GOP could raise student loan bills to pay for Trump’s tax cuts
President Donald Trump promised to extend and expand tax cuts he put in place during his first term in office. Now, Republican lawmakers are considering ways to make that happen.
Lawmakers have floated doing away with student loan repayment plans to potentially save billions.
However, this move could force student loan borrowers to face higher payments and more debt.
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As President Donald Trump looks to follow through with his campaign promise to expand tax cuts, GOP lawmakers look for ways to make it happen. How they do it could potentially impact millions of student loan borrowers.
What could change?
Among plans being floated by House Republicans are new taxes on college scholarships, a hike in taxes on university endowments and an end to student loan repayment plans.
One of the first repayment plans on the chopping block is likely former President Joe Biden’s Saving on Valuable Education. It’s the most forgiving income-driven student loan repayment program enacted since Congress created income-driven repayment plans in the 90s. It was created to help make people’s bills more affordable.
The plans limit how much a person can pay each month to repay their student loan based on their income. It also cancels any leftover debt after a certain time, most often 20 to 25 years.
The SAVE plan would lower monthly payment requirements even more. It would also offer debt forgiveness for those who took out smaller loans of less than $12,000 faster.
How will that impact borrowers?
GOP lawmakers estimated the savings from overhauling the student repayment plan system would be more than $127 billion over 10 years. The recommendations are not set in stone yet, nor is it clear if or when they’d actually be implemented.
According to the Institute for College Access and Success, the average student loan borrower could pay around $200 more monthly if Republican plans to reshape the repayment programs are implemented. However, they said the changes to the student loan system will likely only impact new borrowers.
President Biden forgives more student loan debt, bringing total to $183 billion
More relief is on the way for some borrowers with large amounts of student loan debt. President Biden announced Monday, Jan. 13, that his administration is forgiving such debt for another 150,000 people.
The White House said the debt forgiveness will go to 85,000 people who attended schools that “cheated and defrauded their students,” 61,000 others who have a permanent disability and about 6,000 people who are now public service employees.
Public employees will see $465 million in debt erased, while people with disabilities will have $2.5 billion forgiven. Students, with debt that the administration believes came from schools that acted fraudulently, will see $1.25 billion in debt removed.
The latest move brings a total of $183 billion in debt relief to roughly 5 million federal student loan borrowers during Biden’s time in office. The White House press secretary called it life-changing relief for families and said it allows them to spend money on other priorities, such as housing.
In 2023, the U.S Supreme Court blocked the president’s broader plan to deliver wide-scale student loan forgiveness to tens of millions of borrowers. Instead, the administration has gone through the Department of Education in maximizing existing debt relief programs.
Credit card defaults jump to highest level since 2010: Report
According to the credit rating agency TransUnion, the average American has about $6,300 in credit card debt. Now, a report shows that credit card defaults are rising as family budgets can’t keep up with expenses and the cost of living.
According to the Financial Times, during the first nine months of 2024, lenders were forced to write off $46 billion in delinquent credit card balances. Officials said that’s a 50% jump from 2023 and the highest rate since 2010.
Making matters worse, Moody’s Analytics reports that people who earn at the bottom third of the income ladder are tapped out and now have zero savings.
The New York Federal Reserve released figures showing that credit card debt in September reached $1.17 trillion, the highest level in Fed data-keeping. Household debt, including mortgages, car loans and student loans reached close to $18 trillion, another record. Analysts say some of that is due to inflation and higher interest rates.
As January rolls in, so do the holiday spending bills. Lending Tree says more than one-third of Americans took on additional debt this holiday season, racking up an average of $1,181 in credit card spending.
Biden cancels $4.28 Billion in student debt for public service workers
The Biden administration has announced $4.28 billion in student loan forgiveness for 55,000 public service workers. This latest round of cancellations brings the total amount of debt relief approved by President Joe Biden to nearly $180 billion for approximately 4.9 million borrowers.
The program forgives federal student loans for government and nonprofit workers. However, they’d only qualify after 10 years of making qualifying payments.
Historically, people have criticized the program for its complexity. The Biden administration overhauled the program in 2021 to simplify the process.
The administration highlighted the program’s impact, stating it has allowed borrowers to pursue financial and life plans previously delayed by student loan debt.
Many borrowers were approved but are still waiting for forgiveness. Many have expressed concerns about how the upcoming administration will handle the program.
During his first term, President-elect Donald Trump’s administration delayed forgiveness for students defrauded by for-profit colleges.
Federal courts have blocked many of Biden’s efforts for broader student loan relief. That includes a plan to forgive debt for more than 25 million borrowers.
Federal judges also halted the Biden administration’s SAVE repayment program before it could be fully implemented.
Student borrowers may face default as loan forgiveness remains tied up in court
For millions of student loan borrowers hoping for relief from Washington, things might get more complicated in the months ahead. The Biden administration’s one-year grace period from the Covid-era delay on repayments has expired.
Banks could begin to hit debtors who haven’t begun paying back their student loans with a collection action. Financial experts say it generally takes between nine and 12 months for somebody to face the consequences of defaulting.
People who default on their student loans could face garnishment of their wages, loss of eligibility to get a mortgage and credit rating difficulties.
A federal judge recently blocked President Joe Biden’s second attempt at mass debt cancellation. The U.S. Supreme Court rejected his first attempt in 2023.
The Biden administration also tried to offer new loan repayment plans. However, those have also been tied up in the courts.
Experts said those in deep student loan debt at the federal or state level can try to file an Economic Hardship Deferment. Debtors would need to file a form and answer questions about their ability to repay and work situation. However, only those with loans like Perkins or Federal Family education loans can apply.
Somebody out of work can file a similar form called an Unemployment Deferment Request.
Another option would be to file for student loan forbearance. In this case, the loan provider decides whether to grant the person in debt a chance to make no payment or a smaller payment for a period up to one year, before the case is reviewed again.
Borrowers should receive multiple notices before they go into default or delinquency.
Looking ahead, President-elect Donald Trump said on the campaign trail he would try to roll back the Biden administration’s effort to forgive student loan debt, calling it illegal.
Harris, Trump look for votes in battlegrounds with 2 weeks to go
With exactly two weeks to go until Election Day, both candidates for president are blitzing the battleground states. And we’ve learned how long student loan repayments for about eight million Americans will remain on hold. These stories and more highlight your Unbiased Updates for Tuesday, Oct. 22, 2024.
Harris, Trump look for more votes in battlegrounds with 2 weeks to go
With two weeks to go until Election Day, the presidential candidates are crisscrossing the country trying to pick up any undecided voters that remain.
.@Liz_Cheney: Vice President Harris is going to defend our Constitution. We're not always gonna agree, but I know Vice President Harris will always do what she believes is right for this country. She has a sincere heart, and that's why I'm honored to support her pic.twitter.com/lcFD6MGDSF
“So, I think that we are facing a choice in this election; it’s not about party, it’s about right and wrong,” Cheney said. “And I certainly have many Republicans who will say to me, ‘I can’t be public.’ They do worry about a whole range of things including violence, but they’ll do the right thing.”
In Wisconsin, Harris described her opponent former President Donald Trump as “unstable,” referencing comments made by former Trump cabinet members.
“I think it’s very important that we acknowledge — and I have said publicly that Donald Trump is an unserious man,” Harris said, “and the consequences of him ever being President of United States again are brutally serious. Brutally serious.”
Former President Trump visited North Carolina on Monday where he surveyed the damage created by Hurricane Helene and continued his criticism of the Biden administration’s relief efforts.
“The power of nature, nothing you can do about it, but you got to get a little bit better crew and to do a better job than has been done by the White House,” Trump said. “It’s been not good. Not good. I’m here today in western North Carolina to express a simple message to the incredible people of the state: I’m with you and the American people are with you all the way. We’re going to continue to be with you. We’ll see what happens with the election. And we’re, on January 20th, you’re going to have, I think, a new crew coming in to do it properly and help you in a proper manner.”
Trump made two more stops while in North Carolina Monday, holding a rally and speaking at a faith leaders’ event.
On Tuesday, Oct. 22, former President Trump will continue campaigning in North Carolina with a rally in Greensboro, and Vice President Harris will sit down for an interview with NBC News in Washington, D.C.
Blinken in Israel to revive Gaza cease-fire talks after Sinwar death
U.S. Secretary of State Antony Blinken is in Israel once again — his 11th visit to the region since war broke out between Israel and Hamas a little more than a year ago.
On my way to Israel and other stops in the Middle East for intensive discussions about the importance of ending the war in Gaza, returning the hostages to their families, and alleviating the suffering of the Palestinian people. pic.twitter.com/lIaRUo7Ea2
This visit is the first stop on a wider tour of the Middle East in which Blinken is expected to revive talks for a cease-fire in Gaza in the wake of the death of Hamas leader Yahya Sinwar.
Blinken’s weeklong trip comes as the Middle East braces for Israel’s response to an Iranian missile attack on Tel Aviv earlier this month.
Teen arrested after 2 adults, 3 children killed in shooting at Washington home
Officials with the King County Sheriff’s Office said another teenager who had been injured went to a Seattle hospital. They said that teenager and the teen in custody both live at the home where the shooting happened, but did not know the relationships between those teens and the five people killed.
“I just don’t know the relationships, so I’m going to withhold confirming any relationships, but it does appear to be that this is a family incident,” Deputy Mike Mellis told reporters Monday. “Clearly, a domestic violence incident that involves not only a young man — who’s now in significant trouble — and it involves firearms. Young men and firearms.”
Reports say he has chronic myeloid leukemia, a form of bone marrow cancer, and he’s undergoing treatment at Rikers Island prison in New York where he’s serving a 16-year sentence.
This is just the latest health issue Weinstein has faced behind bars. Last month, he had emergency heart surgery to alleviate a significant amount of fluid in his lungs and heart, and he was hospitalized in July with COVID-19 and double pneumonia.
Student loan payments pause extended for 8 million SAVE plan borrowers
Eight million Americans will be able to continue holding off paying back their student loans for at least another six months, the Department of Education confirmed on Monday.
The Education Department said save enrollees will be placed in an interest-free general forbearance for at least six months pending the outcome of legal challenges to the plan.
Cheapest World Series tickets costing at least $1,000 on secondary market
The Los Angeles Dodgers and New York Yankees have each punched their ticket to the World Series and now if you want a ticket, you’ll need at least $1,000. According to SeatGeek, the cheapest single seat for the Game 1 in LA on Friday, Oct. 25, will cost $1,034.
For Game 2 on Saturday, Oct. 26, also at Dodger Stadium, the least expensive ticket is $1,209.
Games 3 and 4 on Monday and Tuesday, Oct. 28 and 29, head back to the East Coast, with the cheapest tickets for Yankees Stadium costing $1,385 and $1,110, respectively. A possible Game 5 is showing the same as Game 4.
And “if necessary,” Games 6 and 7 would be back in LA, with the cheapest tickets going for around $1,300 or more.
As for the good seats behind home plate at Dodger Stadium, those tickets are going for $1,500 or more.
Biden student loan forgiveness plan gets a win in federal court
President Biden’s student loan forgiveness plan can move forward after a federal judge allowed a temporary restraining order to expire. This, however, does not mean the Biden administration won the case, which will continue working its way through the federal court system.
The lawsuit was filed by seven Republican states: Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota and Ohio. They argued Biden’s new plan to forgive student debt is illegal.
On Wednesday, Oct. 2, a federal judge removed Georgia from the case and moved it to Missouri. According to Reuters, the judge determined Georgia lacked legal standing to sue. The state said it could potentially lose tax revenue but the judge said that would be incidental.
The judge ruled Missouri does have standing to sue because it operates a nonprofit student loan servicer, called MOHELA, which could potentially lose millions of dollars if the Biden plan is ultimately approved.
“The fact remains that this lawsuit reflects an ongoing effort by Republican elected officials who want to prevent millions of their own constituents from getting breathing room on their student loans,” a Department of Education spokesperson told NBC News.
This loan forgiveness was announced after the Supreme Court struck down Biden’s original plan to forgive approximately $400 billion in loans for as many as 43 million Americans back in June 2023.
It would also provide debt cancellation for undergraduate borrowers who entered repayment before July 2005 or graduate borrowers who entered repayment before July 2000.
There are multiple other ways to get relief under the plan. The Department of Education is still working to finalize who will qualify.
