Less than half of student loan borrowers are current on $1.6 trillion in debt

Less than half of student loan borrowers have been making their payments on $1.6 trillion of debt as they struggle to afford housing and groceries – and some are letting the bills pile up as a form of protest.

Only 38% of the 42.7 million borrowers nationwide are in repayment and current following five years of leniency measures from the US government following the COVID-19 pandemic, the Department of Education said in April.

While most borrowers have loans that are less than $40,000, about 3.6 million Americans owe more than $100,000 each in federal loans totaling $656.7 billion – or about 41% of total student debt. 

As of May, about 30% of borrowers with a payment due, or 5.6 million people, were at least 90 days behind, according to TransUnion data.

At the 270-day mark, the government can withhold tax refunds and order employers to garnish up to 15% of a borrower’s after-tax salary.

But these consequences may “feel too abstract to feel motivational for people,” Sarah Newcomb, senior behavioral scientist at Edward Jones, told Bloomberg.

About 2.2 million borrowers saw their credit scores tank by at least 100 points in the first quarter, according to the New York Federal Reserve.

Kameron Davis, a 24-year-old Uber driver in Miami, recently saw his credit score plunge about 180 points for not paying his student loans – but he’s unbothered since he doesn’t plan to buy a home anytime soon.

After dropping out of college when classes went online during the pandemic, Davis is more concerned with supporting his wife and two kids than prioritizing an $800 monthly student-loan payment.

“If I have to choose between paying my rent and paying my student loans, I’m not going to pay my student loans,” he told Bloomberg.

He and his wife owe about $20,000 and $40,000 in student loans, respectively.

Wage garnishment isn’t a concern for the couple, since most Uber drivers are classified as independent contractors and Davis’ wife is a stay-at-home mom.

Some borrowers – like Stephen Jakubowski, a 32-year-old without a job who says he is barely able to afford rent and groceries – claim repayment is the last thing on their minds.

“I just don’t even care, it’s so far down the radar,” he told Bloomberg. “It’s never been a huge priority.”

Jakubowski owes $10,000 from a two-year stint at San Diego Christian College more than a decade ago.

He dropped out of college halfway through his degree to become a firefighter and now feels “disconnected from the debt.”

But the Department of Education is determined to crack down on delinquent borrowers.

Education Secretary Linda McMahon said in April that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”

“The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,” she added.

Borrowers who were in default before the pandemic will be the first to be targeted with wage garnishment, while freelancers and gig workers likely won’t face the same consequences.

“If they can’t find the employer, they can’t collect,” Alpha Taylor, staff attorney for the National Consumer Law Center, told Bloomberg.

Tyler Scruggs, 30, dropped out of college when the pandemic hit. He owes $20,000.

Now a freelancer in the film industry, Scruggs said he never checks his credit score and isn’t planning to make any loan payments.

“There are simply more pertinent financial obligations,” he told Bloomberg. 

“It’s a form of protest — I believe all student debt should be cancelled.”