Over 7.5 million student loan borrowers, or one out of every six borrowers, was in default prior to the pandemic. Before the payment pause, a million debtors defaulted for the first time every year, Education Department Undersecretary James Kvaal said.
Defaulting on your student loans could lead to the federal government withholding your wages, your tax refunds and possibly your Social Security income — a process that’s both blunt and punitive, one government official says.
Default can have wide-ranging effects on a borrower’s life. In addition to seeing their wages garnished, Social Security checks seized and tax refunds withheld, borrowers can take a hit to their credit scores — “driving up the cost of every financial product,” Kvaal said. Prior to the pandemic, delinquency rates on student loans were highest in Mississippi, where 21.6% of borrowers were behind on payments, followed by Puerto Rico, at 20.1%, and Louisiana, at 20%. Debtors in the South “had the highest borrower delinquency rates,” the New York Fed added, “claiming ten of the top twelve states.”
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