Borrowers Face Consequences as Loan Grace Period Ends

The end of the pandemic-era student loan on-ramp period means borrowers will now face consequences for missed payments, including potential credit score impacts and wage garnishments. This grace period, which shielded borrowers from negative credit reporting, concluded as of October 2024, with no extension planned despite advocacy groups urging for continued relief. As the Biden administration's broader debt relief initiatives face legal challenges, a federal judge recently transferred a related lawsuit to Missouri, reinforcing the state's standing to sue. Meanwhile, concerns grow over potential default rates, as many borrowers, who benefitted from the grace period, are not financially prepared for resumed payments. An analysis revealed that 20% of borrowers did not make payments during the on-ramp, and many fear being unable to afford accruing interest. With the legal battle ongoing, the Biden administration's plans for debt relief remain uncertain.