With the pandemic-era pause on student loan payments lifted and debt levels at a record $1.7 trillion nationwide, attention is now turning to the growing number of delinquent loans — and the impact on colleges as well as borrowers.
Missed payments don’t just hurt borrowers. Colleges with large numbers of students who default on their loans could lose access to federal loans and Pell grants – and the students who use them. New federal data show some Alabama institutions are edging uncomfortably close to those sanction thresholds for the first time.
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In May, the U.S. Department of Education notified colleges that the long pause was over, loan repayment was resuming and schools would again be held accountable alongside their former students.
The department urged colleges to reach out to borrowers, warning them that delinquent loans would soon be reported to credit bureaus and that the risk of default — where wages can be garnished and tax refunds seized — was just around the corner.
“The Department believes that greater transparency is needed regarding institutional success in counseling borrowers and helping them get into good standing on their loans,” the notice stated.
That call for transparency became tangible in July, when the department published each institution’s nonpayment rate — the percentage of borrowers who are more than 90 days past due on their loans. Though the nonpayment rate isn’t the same as the official cohort default rate used to impose federal sanctions on colleges, it’s a signal of trouble ahead.
EDITOR’S NOTE — The story was written by Trisha Powell Crain and originally written by the Alabama Daily News.
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