The Department of Education (DOE) on April 21 announced it would resume collections on defaulted student loans starting May 5.1 While this policy shift is expected to pose a headwind for consumer credit fundamentals, the degree of impact will depend largely on the intensity of the DOE’s collection efforts and the effectiveness of its concurrent borrower support initiatives. These include efforts to simplify repayment plan structures and expand availability at loan servicer call centers. At this time, we do not anticipate the reinstated collections to result in meaningful or broad-based deterioration in the performance of securitized consumer credit.
Key Takeaways
- The DOE estimates that approximately 16 million borrowers (38%) are in active repayment and current on their student loans. Meanwhile, more than 5 million borrowers (12%) have not made a monthly payment in over 360 days and are in default—many for more than seven years—and 4 million…
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