In a new report, the Consumer Financial Protection Bureau (CFPB) is seeking to identify which types of student loan borrowers will struggle to resume repayment once the pause on monthly payments and interest accrual comes to an end, finding that more than 5 million face heightened risk factors.
CFPB said that while the relief is currently slated to end this calendar year, there remains significant uncertainty as to how financially ready borrowers will be when the time comes to resume monthly payments.
“With the record number of borrowers entering repayment at once, recent servicing changes, and many unresolved financial difficulties from well before the pandemic, millions of borrowers might face a difficult road after pandemic related relief expires,” the report writes.
By utilizing data from the agency’s Consumer Credit Panel (CCP), CFPB identified a number of risk factors that could better indicate which types of borrowers could face the most significant financial burden in returning to repayment.
The sample represents around 34 million student loan borrowers, about 80% of all student loan borrowers in the CCP, including those with private loans — in order to account for borrowers with federally-owned loans covered by the payment suspension who also have other loans — and those with loans which had not yet entered repayment as of February 2020.
Those factors include: pre-pandemic delinquencies on student loans, pre-pandemic payment assistance on student loans, multiple student loan servicers, delinquencies on other credit products since the start of the pandemic, and new third-party collections during the pandemic.
CFPB also indicated that its sample size is larger than a recent Government Accountability Office (GAO) estimate of 26.6 million borrowers likely to re-enter repayment when the suspension ends, due to the inclusion of borrowers who had not yet entered repayment.
According to CFPB roughly 15 million borrowers were identified as having one of these five risk factors, while 5 million were determined to have experienced two.
“These borrowers can be found in all demographic groups but are concentrated in low-income and high-minority census tracts and are more likely to be 30 to 49 years old,” the report writes. “Additionally, there are other borrowers outside the scope of this report, such as those with scheduled IDR payments of $0 and those with loans in default, who may not struggle immediately after the suspension ends but who may face difficulties later.”
CFPB also said its office of research will continue monitoring student loan repayment performance and risk factors in the coming months to better gauge what kinds of support may be needed in this transition period.
Publication Date: 4/21/2022