Americans collectively owe $1.6 trillion in student debt, and after five years of pandemic-era generosity, loan payments have returned. However, only about a third of borrowers have made payments as of April, according to the U.S. Department of Education. Many prioritize housing, food and transportation costs over student loan bills, but others have stopped paying as a form of protest after President Biden’s forgiveness plan was rescinded in court.
The outcome of non-payment is realistic, but often arrive late. The most direct effect is the damaged credit score, and potential wage ornaments may come later. For some, threats are far too far to change behavior. “The results can feel too abstract to motivate you… [feelings] Sarah Newcombe, senior behavioral scientist at Edward Jones, said:
Some Florida borrowers already feel it is working. In Miami, 24-year-old Uber driver Kameron Davis fell by about 180 points after missing payments on a loan of around $20,000. His wife owes another $40,000. With a $800 bill each month and supporting two children, he says that paying rent will be the first to come. “If I have to choose to pay rent and student loans, I am not going to pay student loans,” he said.
Nationally, around 3.6 million people each borrow more than $100,000, accounting for around 41% of federal student debt. According to Transunion, in May, roughly 30% of federal student loan borrowers, who have been paid out by 5.6 million people, were paid. Borrowers risk withholding tax refunds more than 270 days late, and the government can decorate up to 15% of their post-tax payments.
Wage decorations usually take months to start, and freelancers and gig workers may never be affected. For example, drivers working on platforms like Uber are not considered official employees, making it difficult to carry out collections.
Florida-specific snapshots
Paragraph borrowers and debt volume: Over 2.7 million Floridians hold approximately $100.5 billion in federal student loans. Almost 45% are under the age of 35.
Repayment status: Nationwide, only 38% of borrowers are up to date with payments. Approximately 4 million people are in the late stages (91-180 days late).
Default Rate: Florida’s two-year federal student loan default rate is around 13.5%, and three years is around 20.2%, with debt burden near or above the national average: Florida residents owing an average of $39,574, slightly above the US average. By the institution: At the University of South Florida, the 2021 cohort defaulted at 0%, with 31% of graduates taking an average of $20,522 in debt. Reopened Collection: The Treasury Offset Program, which can seize tax refunds on unpaid student loans, is back in operation.
