Student Loan Delinquency Risks Surge as 'On-Ramp' Period Ends

The expiration of the student loan 'on-ramp' period, a 12-month grace period that allowed borrowers to resume payments without penalty, has raised concerns about an increased risk of delinquency among borrowers. As of September 30, 2023, student loan servicers are once again able to report missed payments to credit agencies, potentially impacting borrowers' credit scores and future financial prospects.


A recent report by the National Endowment for Financial Education (NEFE) found that nearly half (47%) of borrowers had made at least some payments since the end of the payment pause, while 26% had made no payments at all. Additionally, a separate report by Intuit Credit Karma revealed that 20% of borrowers had not made any payments since the pause ended, with many expressing concern about their ability to afford the accrued interest and the potential impact on their credit scores.


The risk of delinquency varies among borrowers with different loan amounts and repayment plans. According to the Government Accountability Office (GAO), nearly 10 million borrowers were past due on their loan payments as of January 31, 2024, with the highest delinquency rates among those with the largest loan balances and those enrolled in income-driven repayment plans.

Income-driven repayment plans, such as the Saving on a Valuable Education (SAVE) plan, can help mitigate the risk of delinquency for low-income borrowers by reducing monthly payments based on income and family size. However, these plans may not be sufficient to prevent delinquency for all borrowers, particularly those with high loan balances or facing financial hardship.

Student loan forgiveness or debt relief programs can play a crucial role in reducing the risk of delinquency and default. By providing borrowers with a pathway to discharge their debt, these programs can alleviate the financial burden and help borrowers maintain good credit. However, the future of these programs remains uncertain, and borrowers should explore all available options to manage their debt responsibly.

As the 'on-ramp' period comes to an end, borrowers may face increased pressure to resume payments and avoid delinquency. To mitigate the impact of missed payments on their credit scores and future financial opportunities, borrowers should prioritize budgeting, explore income-driven repayment plans, and consider seeking professional financial advice. Additionally, the end of the 'on-ramp' period may influence the demand for student loan refinancing and consolidation options, as borrowers seek to manage their debt more effectively.