Roughly six million federal student-loan borrowers are 90 days or more past due after a pandemic-era reprieve ended, according to TransUnion. The credit-reporting company estimates that about a third of them, or nearly two million borrowers, could move into default in July and start having their pay docked by the government. That’s up from the 1.2 million that TransUnion had estimated in early May.
An additional one million borrowers are on track to default by August, followed by another two million in September. Borrowers fall into default when they are 270 days past due.
Some borrowers might be having communication issues with their student-loan servicers, while others might be too financially stretched to make payments, said Joshua Turnbull, head of consumer lending at TransUnion.
The Education Department restarted collections on defaulted student loans in May, something it hadn’t done since before the pandemic. The department sent notices to borrowers saying their tax refunds and federal benefits could be withheld starting in June if they don’t take steps to resume payments.
Wage garnishment is also set to restart this summer. Until past due payments are paid in full or the default status is resolved, borrowers could see up to 15% of their wages automatically deducted from their paychecks.
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