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Millions of Americans are poised to take hits to their credit ratings as the Biden administration’s one-year moratorium on reporting late student loan payments to credit agencies will come to an end in just a few weeks.
About 9.7 million, or 29%, of student loan borrowers in the U.S. were late on payments, according a report released in late July by the Government Accountability Office. About 60% of those borrowers were at least three months behind in payments.
In March 2020, a forbearance on student loans put in place by former President Donald Trump allowed borrowers to stop making loan payments without incurring interest costs and getting reported to the credit agencies.
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That forbearance ended on Sept. 30, 2023, so President Joe Biden implemented a 12-month “on-ramp” period during which student loan servicers could not report loan delinquencies to credit agencies.
That provision will end on Sept. 30, leaving millions of borrowers who are still late on their loans open to damaging hits to their credit scores, which banks use to approve loans, landlords use to approve rental agreements and so on.
Transfers from Education to the Treasury indicate a steady fall in student loan repayments over the past year. Last summer, monthly transfers were about $7 billion, but that figure fell last month the figure to $4.1 billion.
The Biden administration has forgiven some $168.5 billion in student debt through various programs, but the courts have blocked its attempts to pass a Save on a Valuable Education (SAVE) student loan relief program.
Most recently, U.S. District Judge J. Randal Hall temporarily blocked the Biden administration’s latest student debt relief plan on Sept. 5 in a lawsuit brought by Seven Republican-led states.
Price Action: Student loan servicers fell and rose into Monday's mid-afternoon trading.
Meanwhile, exchange-traded funds that hold SoFi shares registered gains.
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