As federal student loan protections expire, borrowers face resuming payments in a challenging economic landscape characterized by rising inflation and a looming recession. The end of zero-interest deferments will particularly harm those with delinquent loans, significantly impacting their credit scores. With over 40 million Americans holding student loans, the resumption will see 1.8 million borrowers placed on repayment plans, and existing defaults moving to collections, jeopardizing their ability to secure mortgages, as credit scores are crucial in obtaining favorable mortgage terms.
"These actions will move the federal student loan portfolio back into repayment, which benefits borrowers and taxpayers alike," Education Secretary Linda McMahon said on April 23 in the announcement.
"A borrower's credit score can impact whether they can secure a mortgage loan, and what interest rate they are offered," explains Realtor.com® senior economic research analyst Hannah Jones.
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