The student loan bubble is about to pop

The Washington Post ^ | April 29, 2025 6:00 a.m. EDT | Preston Cooper

[E. Pluribus Unum]

As collections resume after five years, disaster looms for delinquent borrowers.

At the outset of the covid-19 pandemic, federal student-loan borrowers won what appeared to be a reprieve. That five-year pause on payments and interest accumulation is now shaping up to be a curse in disguise. Last week, the Trump administration drew criticism for announcing that the Education Department would resume involuntary collections next month. But the squeeze delinquent borrowers will soon feel is an inevitable consequence of the suspension, exacerbated by the Biden administration’s prolonged refusal to let payments resume.

That’s because nonpayment ballooned after the pause functionally ended last October, meaning more than half of borrowers are not paying their loans on time. Data provided to me by Nelnet, the largest student-loan servicer, offers a grim look at repayment patterns.

In February 2020, the last month before the government paused payments, 60 percent of Nelnet’s borrowers were repaying their debts. Five years later, payments are due again — but the repayment rate has fallen to 38 percent.

Some of that drop results from the Education Department placing 8 million borrowers in forbearance — a temporary postponement of payments — pending courts’ decisions on legal challenges to the Biden administration’s repayment plan.

But even with this factored in, Nelnet’s data shows a spike in delinquencies compared with before the pandemic. A staggering 15 percent of borrowers are more than 90 days delinquent, which is reported to credit bureaus.

If this wave of delinquencies continues, the Education Department has warned that 10 million borrowers — nearly a quarter of the total — could be in default within a few months.

Reasons for nonpayment vary, but many stem from the pause. Some borrowers are simply unaware payments are due again — after all, the...

[posterchild]

I worked all through my undergrad hears while getting a STEM degree. When grad school came I got a teaching assistantship and ran off to a regional big city for a summer internship -saving my money for the academic year. I had no debt.

What i think has happened since then (35 some years ago) was that slowly your classmates started getting loans. Much like easy mortgage money this led to a rise in tuition/board/book costs and to continue on more and more students had to go into debt.

[FlingWingFlyer]

A lot of money wasted putting morons who shouldn’t be in high school through “college”. Jerks with attendance certificates.

[ETCM]

I am all for their loans being forgiven, and it should come out of the endowments of the universities that exploited them.

First, that's not what "forgiveness" means. That would be seizing the assets of schools to pay off student debt. Second, about 3 our of 4 students attend public schools, not private schools with fat endowments. Those that do attend private schools are more likely to pay off their loans, so they are less responsible for the default problem than public.

The answer is to get the government out of the business of student loans. Let private lenders assess the risk of loaning an 18 year old money for a degree that is unlikely to result in producing income to pay it off. Meanwhile, those that took on debt should pay it off.

[E. Pluribus Unum]

The universities, public or private, knew exactly what they were doing. They knew they could charge the dumb 18-year olds anything they wanted and the dumb 18-year olds would borrow the money and hand it over to them.

[outofsalt]

"I am for adjustments, otherwise, their lives are destroyed."

A military tour of duty will adjust their prospects.

[DAC21]

“You were an adult and assumed the obligation. Not my problem if you have problems paying back what you owe”

And in many cases, your parents co signed those the loans. Apparently they aren’t stepping up either. Are they not liable?

[packagingguy]

I’m hoping the bubble will pop in the next few years so tuition becomes affordable again…my kid is going to be college age in less than ten years.

[redgolum]

Well there goes midterms.

Let it be discharged in bankruptcy. Have them held by the schools.

[castlebrew]

No loan forgiveness! Who do you think picks up the tab? Taxpayers, that’s who. In effect, you would be gifting taxpayer funds to individuals (a no-no).

BTW, do you recall why bH0 got gov’t into the student loan business? So that the interest would pay for ObamaDon’tCare.

How do you propose to replace that funding source if student loans are forgiven? At least have it reportable as imputed income in the year forgiven so that they pay income taxes on the full amount of the loan.

What “adjustments” would you propose? 5 years of forebearance did nothing but make this situation worse.

They signed for the loans, not me. They destroyed their own lives with no help from me.

“...she and her husband had a combined student debt of $400,000, working on PhDs in a not very lucrative profession.”

So they’ve got $400K in debt, and are still working on useless PhDs? Can anyone see what’s wrong with this picture? Bartenders are required to stop serving those who even appear drunk, regardless of the amount served.

Time to cut them off, and for them to sober up. No more debt until it’s all paid off. If ever.

[castlebrew]

That judge broke the law.

If she wants to cover some kid’s debt, she can write the check on her own bank account.

[castlebrew]

Fedgov is the predatory lender in this case.

As it was in the mortgage loan fiasco.

[hinckley buzzard]

Five year pause with no payments and no accrued interest, and almost no one apparently thought to put something away for when the payments would need to resume. There are no words.

[Brian Griffin]

“How do you propose to replace that funding source if student loans are forgiven?”

The government borrowing at 4% and lending at 4% would not generate a profit, only possible losses.

[MotorCityBuck]

Blah,Blah, Blah.

[Brian Griffin]

“These students need to discharge those loans in bankruptcy.”

Perhaps the schools could be sued for selling an “education” not worth the price paid.

Most students go to college to increase their income prospects.

[sport]

The way I got rid of my Student Loan was I paid it off.

They should have to pay theirs. But that is not the way things are done now. When someone screws up, it is never their fault. Someone else is always to blame. And they say, “Hell with this debt !”. The Government takes care of it and they start another debt to walk away from. Sooner or later, it will collapse the United States. But that is the plan. And it is working. Who gives a shit is the prevailing attitude.

[KC_Conspirator]

Thats about it. Obama became the loan shark and somehow this was sold as free money because taxpayers would float it.

[HombreSecreto]

Same...walked out of every degree program debt free.

[HonkyTonkMan]

So many students are conned into the “college experience.” I see the vehicles these students drive and the spring break trips and the luxury apartments , but that loan money is adding up.

difficult to start a career underwater unless it’s medical or legal.

[alternatives?]

It is worse relative to attendees as well.