Latest news with #PrestonCooper
Yahoo
08-08-2025
- Business
- Yahoo
Student loan delinquencies are on the rise. Here's why.
Student loan delinquencies are surging after a years-long relief period ended for borrowers behind on their payments. Of the country's aggregate student debt, 10.2% was reported as more than 90 days delinquent in the second quarter of 2025, according to the Federal Reserve Bank of New York. Meanwhile, 12.9% of student loans entered serious delinquency in that time period, the highest rate in 21 years of data. Read more: After Trump's budget bill, are federal student loans still the gold standard? 'Missed federal student loan payments that were not previously reported to credit bureaus between Q2 2020 and Q4 2024 are now appearing in credit reports,' the New York Fed said in a press release. 'Consequently, student loan delinquency rates continued to rise.' Sign up for the Mind Your Money weekly newsletter By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy The repayment issue has come full circle from March 2020, when Congress passed a massive COVID-19 relief package that allowed borrowers to pause payments on federal student loans without penalty, reduced interest rates to 0%, and stopped reporting missed payments to credit bureaus. Delinquency rates fell to less than 1%. After that provision was extended several times, interest rates resumed in September 2023, and payments restarted in October of that year. Still, there was an 'on-ramp' period for a year, said Preston Cooper, a senior fellow at the American Enterprise Institute, a conservative think tank. Even though payments were technically due, missed payments didn't damage borrowers' credit scores, and delinquencies weren't recorded. That policy expired last fall, and delinquencies began appearing on credit reports again this year. 'This is when the trouble kind of began,' Cooper told Yahoo Finance. 'We have a lot of people who had been told over and over again that payments are going to be due, only for the pause to be extended. Now they're told payments are going to be due, and the pause actually does end. You can imagine a lot of people just really weren't paying attention.' During the relief period, many borrowers also moved, changed their loan servicers, and changed their contact information, Cooper said. 'We're not in a great situation right now,' Cooper said. 'The percentage of borrowers who are in current repayment on their loans is just about 35%, according to the most recent data, which was in March. We have delinquencies being very elevated, we have a lot of people in forbearance, and we have repayment rates that are very far below what they were pre-pandemic.' Learn more: 10 ways the One Big Beautiful Bill affects student loans and financial aid Joshua Turnbull, senior vice president and head of consumer lending at TransUnion, recently wrote that delinquencies have particularly increased among prime and super-prime borrowers who may have the capacity to pay but may be facing 'confusion, budgeting inexperience, or a belief that further relief may be coming.' These delinquent borrowers aren't fresh grads, either. The New York Fed noted in May that the average age of a delinquent borrower was just over 40. 'We're going into a new era in terms of how many people are going to be going into default,' Cooper said. Read more: Tips and tricks for paying off student loans quickly Emma Ockerman is a reporter covering the economy and labor for Yahoo Finance. You can reach her at Sign up for the Mind Your Money newsletter Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
08-08-2025
- Business
- Yahoo
Student loan delinquencies are on the rise. Here's why.
Student loan delinquencies are surging after a years-long relief period ended for borrowers behind on their payments. Of the country's aggregate student debt, 10.2% was reported as more than 90 days delinquent in the second quarter of 2025, according to the Federal Reserve Bank of New York. Meanwhile, 12.9% of student loans entered serious delinquency in that time period, the highest rate in 21 years of data. Read more: After Trump's budget bill, are federal student loans still the gold standard? 'Missed federal student loan payments that were not previously reported to credit bureaus between Q2 2020 and Q4 2024 are now appearing in credit reports,' the New York Fed said in a press release. 'Consequently, student loan delinquency rates continued to rise.' Sign up for the Mind Your Money weekly newsletter By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy The repayment issue has come full circle from March 2020, when Congress passed a massive COVID-19 relief package that allowed borrowers to pause payments on federal student loans without penalty, reduced interest rates to 0%, and stopped reporting missed payments to credit bureaus. Delinquency rates fell to less than 1%. After that provision was extended several times, interest rates resumed in September 2023, and payments restarted in October of that year. Still, there was an 'on-ramp' period for a year, said Preston Cooper, a senior fellow at the American Enterprise Institute, a conservative think tank. Even though payments were technically due, missed payments didn't damage borrowers' credit scores, and delinquencies weren't recorded. That policy expired last fall, and delinquencies began appearing on credit reports again this year. 'This is when the trouble kind of began,' Cooper told Yahoo Finance. 'We have a lot of people who had been told over and over again that payments are going to be due, only for the pause to be extended. Now they're told payments are going to be due, and the pause actually does end. You can imagine a lot of people just really weren't paying attention.' During the relief period, many borrowers also moved, changed their loan servicers, and changed their contact information, Cooper said. 'We're not in a great situation right now,' Cooper said. 'The percentage of borrowers who are in current repayment on their loans is just about 35%, according to the most recent data, which was in March. We have delinquencies being very elevated, we have a lot of people in forbearance, and we have repayment rates that are very far below what they were pre-pandemic.' Learn more: 10 ways the One Big Beautiful Bill affects student loans and financial aid Joshua Turnbull, senior vice president and head of consumer lending at TransUnion, recently wrote that delinquencies have particularly increased among prime and super-prime borrowers who may have the capacity to pay but may be facing 'confusion, budgeting inexperience, or a belief that further relief may be coming.' These delinquent borrowers aren't fresh grads, either. The New York Fed noted in May that the average age of a delinquent borrower was just over 40. 'We're going into a new era in terms of how many people are going to be going into default,' Cooper said. Read more: Tips and tricks for paying off student loans quickly Emma Ockerman is a reporter covering the economy and labor for Yahoo Finance. You can reach her at Sign up for the Mind Your Money newsletter
Yahoo
01-07-2025
- Business
- Yahoo
Congress considering borrowing limits on federal student loans
(NewsNation) — Congress is still hashing out the details of President Trump's 'big, beautiful' budget bill, but one thing seems clear: Whatever passes will have major implications for student loans. Both the House-passed version and the proposal still being debated in the Senate include several changes to the federal student loan system, an overhaul Senate Republicans say could save taxpayers at least $300 billion. A central feature of both plans: new caps limiting how much money people can borrow from the federal government to finance their education. Some say the loan limits, specifically those on graduate school and parent borrowing, are long overdue. 'Study after study has shown that colleges exploit these unlimited loans to hike tuition,' Preston Cooper, a senior fellow at the right-leaning American Enterprise Institute, wrote in a recent op-ed. 2M student loan borrowers at risk of garnished wages But advocacy groups warn that Republicans' proposed changes will make it harder for low-income students to afford college — and push more borrowers to private lenders, whose loans generally offer fewer protections. Professional organizations like the American Medical Association have also raised concerns, saying the borrowing cap could deter qualified medical students and worsen the physician shortage. Here's what to know about the proposed caps on federal student loans. While the House and Senate proposals differ in details, both would limit how much parents can borrow through the federal Parent PLUS loan program to help pay for their children's college. Under the House plan, parents of undergraduates would be limited to borrowing $50,000 total, while the Senate plan would cap parent borrowing at $65,000 per student. Currently, there is no limit, and parents can borrow up to the full cost of attendance. Parent PLUS loans let families help pay for their children's education without saddling the student with additional debt in their name. But they often come with less favorable loan terms and have caused many parents to sacrifice their financial stability to help their children. In 2022, parents in more than 3.7 million families owed over $104 billion through the federal Parent PLUS loan program, according to the Century Foundation, a progressive think tank. By the time a student completes their program, the median Parent PLUS debt burden carried by parents who used the loan is roughly $29,600, the report found. After ten years, more than half of the original balance (55%) still remains, on average, per the Century Foundation. The legislation would cap the amount students can borrow for graduate school at a total of $100,000 for most master's programs. For professional degrees, like law or medical school, the total cap would be $150,000 under the House plan or $200,000 under the Senate's. As it stands now, those students can borrow up to the full cost of attendance through Grad PLUS loans. Cooper called the proposed maximums a 'good start' in his op-ed and said they should help rein in 'predatory' lending practices. 'Universities have used graduate loans as a cash cow to finance expensive master's degree programs of dubious value, while many schools have foisted tens of thousands of dollars in parent loans on low-income families,' he wrote. Behind on student loans? Act now; 5 million summer defaults loom But the loan ceiling, along with other proposed changes, has also raised concerns. 'The potential impact of these student-loan changes would be to worsen a growing physician workforce shortage that is already making it difficult for people to access timely care in vast areas of the country, especially in high-demand specialties,' Dr. Bruce Scott, recent president of the American Medical Association, wrote earlier this month. According to the Association of American Medical Colleges, the median cost of attending four years of medical school for the class of 2025 is $286,454 for public institutions and $390,848 for private schools. Both totals are well above the proposed borrowing caps. Nearly 43 million borrowers collectively owe $1.7 trillion in federal student loan debt. That amount represents more than 92% of all student loan debt, meaning roughly 8% is private, according to the Education Data Initiative. Some worry that capping federal student loans will steer more borrowers to the private market, which often comes with higher costs and fewer protections. 'Students and parents will be forced to turn to expensive, high-risk private lenders — many of whom have a sordid history of exploiting borrowers,' the Century Foundation warned in a recent commentary. The article pointed out that even though private student loans only account for 8% of debt, more than 40% of student-loan-related complaints submitted to the Consumer Financial Protection Bureau are about private loans. Still, Senate Republicans argue that sweeping student loan changes — including borrowing caps — are needed to fix what many see as a broken system. 'American higher education has lost its purpose. Students are graduating with degrees that won't get them a job and insurmountable debt that they can't pay back,' U.S. Senator Bill Cassidy, R-La., said in a statement announcing the Senate plan earlier this month. President Trump is urging Congress to pass the megabill by the Fourth of July, but federal lawmakers are still debating the details. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
The Hill
27-06-2025
- Business
- The Hill
Congress considering borrowing limits on federal student loans
(NewsNation) — Congress is still hashing out the details of President Trump's 'big, beautiful' budget bill, but one thing seems clear: Whatever passes will have major implications for student loans. Both the House-passed version and the proposal still being debated in the Senate include several changes to the federal student loan system, an overhaul Senate Republicans say could save taxpayers at least $300 billion. A central feature of both plans: new caps limiting how much money people can borrow from the federal government to finance their education. Some say the loan limits, specifically those on graduate school and parent borrowing, are long overdue. 'Study after study has shown that colleges exploit these unlimited loans to hike tuition,' Preston Cooper, a senior fellow at the right-leaning American Enterprise Institute, wrote in a recent op-ed. But advocacy groups warn that Republicans' proposed changes will make it harder for low-income students to afford college — and push more borrowers to private lenders, whose loans generally offer fewer protections. Professional organizations like the American Medical Association have also raised concerns, saying the borrowing cap could deter qualified medical students and worsen the physician shortage. Here's what to know about the proposed caps on federal student loans. While the House and Senate proposals differ in details, both would limit how much parents can borrow through the federal Parent PLUS loan program to help pay for their children's college. Under the House plan, parents of undergraduates would be limited to borrowing $50,000 total, while the Senate plan would cap parent borrowing at $65,000 per student. Currently, there is no limit, and parents can borrow up to the full cost of attendance. Parent PLUS loans let families help pay for their children's education without saddling the student with additional debt in their name. But they often come with less favorable loan terms and have caused many parents to sacrifice their financial stability to help their children. In 2022, parents in more than 3.7 million families owed over $104 billion through the federal Parent PLUS loan program, according to the Century Foundation, a progressive think tank. By the time a student completes their program, the median Parent PLUS debt burden carried by parents who used the loan is roughly $29,600, the report found. After ten years, more than half of the original balance (55%) still remains, on average, per the Century Foundation. The legislation would cap the amount students can borrow for graduate school at a total of $100,000 for most master's programs. For professional degrees, like law or medical school, the total cap would be $150,000 under the House plan or $200,000 under the Senate's. As it stands now, those students can borrow up to the full cost of attendance through Grad PLUS loans. Cooper called the proposed maximums a 'good start' in his op-ed and said they should help rein in 'predatory' lending practices. 'Universities have used graduate loans as a cash cow to finance expensive master's degree programs of dubious value, while many schools have foisted tens of thousands of dollars in parent loans on low-income families,' he wrote. But the loan ceiling, along with other proposed changes, has also raised concerns. 'The potential impact of these student-loan changes would be to worsen a growing physician workforce shortage that is already making it difficult for people to access timely care in vast areas of the country, especially in high-demand specialties,' Dr. Bruce Scott, recent president of the American Medical Association, wrote earlier this month. According to the Association of American Medical Colleges, the median cost of attending four years of medical school for the class of 2025 is $286,454 for public institutions and $390,848 for private schools. Both totals are well above the proposed borrowing caps. Nearly 43 million borrowers collectively owe $1.7 trillion in federal student loan debt. That amount represents more than 92% of all student loan debt, meaning roughly 8% is private, according to the Education Data Initiative. Some worry that capping federal student loans will steer more borrowers to the private market, which often comes with higher costs and fewer protections. 'Students and parents will be forced to turn to expensive, high-risk private lenders — many of whom have a sordid history of exploiting borrowers,' the Century Foundation warned in a recent commentary. The article pointed out that even though private student loans only account for 8% of debt, more than 40% of student-loan-related complaints submitted to the Consumer Financial Protection Bureau are about private loans. Still, Senate Republicans argue that sweeping student loan changes — including borrowing caps — are needed to fix what many see as a broken system. 'American higher education has lost its purpose. Students are graduating with degrees that won't get them a job and insurmountable debt that they can't pay back,' U.S. Senator Bill Cassidy, R-La., said in a statement announcing the Senate plan earlier this month. President Trump is urging Congress to pass the megabill by the Fourth of July, but federal lawmakers are still debating the details.
Forbes
05-05-2025
- Business
- Forbes
Republican Education Reform Bill: Reshaping Higher Education's Future
Loan or savings for college. Graduation cap and roll of dollars. A seismic shift in federal higher education policy is on the horizon. The Republican-led House Education Committee has unveiled what many analysts call the most sweeping changes to student financial aid in decades. This ambitious overhaul introduces significant reforms affecting everything from loan caps to institutional accountability, with profound implications for students, families, colleges, and taxpayers. The bill's architects frame these reforms as necessary corrections to a broken system that has fueled both skyrocketing tuition costs and unsustainable student debt. Critics counter that many proposals threaten to pull the educational ladder up behind those who have already climbed it. Several key provisions that would dramatically restructure how Americans pay for college are at the heart of the legislation. Let's examine each major component and what it would mean for different stakeholders across the educational landscape. Perhaps the most consequential change would cap annual federal financial aid at the previous year's national median cost of attendance for specific programs. Preston Cooper, notes in Forbes that 'Study after study has shown that colleges exploit these unlimited loans to hike tuition,' suggesting this measure could finally create downward pressure on tuition. The bill would also establish lifetime borrowing limits: 50,000 for undergraduates, $100,000 for graduate programs, and $150,000 for professional degrees such as medicine and law. The House Education and the Workforce Committee states that these caps would curb excessive debt burdens. However, the American Council on Education has pushed back firmly, arguing that "limiting the availability of federal aid to the median cost of specific programs" is among several "harmful proposals" that would "reduce student aid to low-income students and would impose onerous financial penalties on institutions, particularly those least able to meet them." The organization warns this approach fails to account for regional cost variations and could disproportionately impact institutions in high-cost areas. The legislation targets several established loan programs. Grad PLUS loans and unsubsidized loans for undergraduates would be eliminated entirely. Parent PLUS loans would remain but with a new $50,000 aggregate limit. Federal student loans for part-time students would be prorated based on credit hours. These changes would substantially simplify the federal loan system and reduce government spending. The House Education Committee argues these reforms would streamline "complicated, confusing student loan programs." But simplification comes at a cost. Higher education experts have warned that "the death of Grad PLUS alone might threaten to close some colleges," according to reports from Inside Higher Ed. Graduate students would face significantly reduced borrowing options, while undergraduates would lose necessary interest subsidies during their studies. While the bill assumes market forces will drive down costs, but in the short term, it will almost certainly reduce access for those with limited family resources. The legislation would dramatically simplify repayment options, reducing them to just two plans: one with fixed monthly payments over 10-25 years and another setting payments between 1-10% of borrowers' income. While simplification could reduce confusion for borrowers navigating the current maze of repayment options, the National Association of Student Financial Aid Administrators (NASFAA) has expressed concern that the proposed income-driven repayment plans would be less generous than current options. The American Council on Education warns these changes would establish less favorable loan repayment options, leading to students paying more, borrowing more, and facing costlier repayment terms. The Pell Grant program, the cornerstone of need-based federal aid, would undergo significant changes. Students would need to work at least 15 semester hours per year to qualify, a requirement that could exclude many part-time students who are juggling work, family, or other obligations. On the positive side, eligibility would expand to students in "short-term, high-quality, workforce-aligned programs," potentially helping non-traditional students quickly gain marketable skills. The bill also allocates $10.5 billion to address the current Pell shortfall, ensuring the program's near-term stability. Perhaps the most controversial element of the legislation is its approach to institutional accountability. Schools would be required to reimburse the government for a percentage of unpaid student loans disbursed after 2027, with the percentage based on price, graduates' earnings, and completion rates. Rep. Suzanne Bonamici (D-OR) called the proposal "shortsighted," arguing it creates this perverse incentive for schools to shut down programs that prepare students for in-demand but underpaid careers like teaching or social work or public service fields and would create an incentive for schools to enroll wealthier students who are more likely to repay their loans at higher rates. The American Council on Education's analysis found that 98 percent of institutions would have a risk-sharing payment" and 75 percent of institutions would have an overall net loss, which would penalize institutions serving the largest numbers of those students who struggle most in the labor market: low income, first generation, and underrepresented student populations." The legislation would eliminate several Obama and Biden-era regulations, including the 90/10 rule requiring for-profit colleges to obtain at least 10% of revenue from non-federal sources and the gainful employment rule holding programs accountable for graduates' debt-to-income ratios. The bill would repeal the Biden administration's version of the borrower defense to repayment regulations, which makes it easier for students defrauded by their colleges to get debt relief. The Senate Republican proposal, while sharing many elements with the House version, takes a more moderate approach in several areas. According to Forbes, the Senate version maintains subsidized loan availability for undergraduates and offers different repayment structures. As this legislation moves through Congress, fundamental questions emerge about its impact on American higher education. While specific proposals address legitimate concerns about college affordability and student debt, others threaten to reduce access for disadvantaged students and create new challenges for institutions serving vulnerable populations. In a letter to Rep. Wahlberg, chair of the Education and Workforce Committee, Ted Mitchell, President of the American Council on Education, wrote on behalf of 6 other educational associations, that 'The overwhelming majority of provisions in the bill would reduce student aid to low-income students and would impose onerous financial penalties on institutions, particularly those least able to meet them.' Whether this, or Preston Cooper's view that 'If passed, the result of this policy mix will be a saner and more sustainable student loan system,' will be borne out as the final bill is enacted and the changes take place. As the debate unfolds, one certainty emerges: American higher education is on the cusp of its most significant policy transformation in decades. Whether that transformation expands opportunity or contracts it will shape economic mobility, workforce development, and social equity for years to come.
