Welcome to today’s podcast, where we dive into the growing crisis of student loan payments in the U.S. After a five-year hiatus, the federal government resumed reporting late payments to credit bureaus, causing millions of borrowers’ credit scores to plummet. Shockingly, only one-third of the 38 million Americans with student loans are making payments. Loan servicers estimate that around four million have already been reported for late payments, a figure projected to exceed nine million by the end of June.

Economist Preston Cooper warns, “It’s not a problem we want to add to the pile,” highlighting the potential burden on taxpayers if defaults increase. Even borrowers with good credit are feeling the pinch, with over 500,000 seeing their scores drop by an average of 128 points due to late payments. Many borrowers are pointing to bureaucratic delays and the struggle to reintegrate hefty monthly payments after years of suspension. Colleen Campbell, a former Education Department executive, noted, “You’ve gotten people out of the habit of repaying now for the better part of five years.”

As we look ahead, experts fear we may witness the largest wave of defaults in history, with predictions of up to five million defaults looming. Borrowers are stuck navigating a convoluted system with insufficient support. Alan Collinge of Student Loan Justice expressed concern, saying, “I’m seeing people lose their minds.” The situation is dire, and it’s critical that we keep an eye on how this unfolds. Stay tuned for more updates on this developing story.
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