Part 6/9:
The last five years have seen a government-imposed pause on student loan interest payments, a temporary relief that has now ended as of September 2023. Many borrowers, perhaps unaware of the necessity to resume payments, may be caught unprepared when their credit scores start reflecting defaults. The timeline between the cessation of the reporting moratorium and the initiation of credit reporting could result in a hidden wave of defaults that only reveals its full impact in the months to come.
An alarming aspect is the misleading indication of a 0% default rate on student loans, despite the reality of 15% delinquencies highlighted by New York Fed analysis. Such discrepancies could have profound implications for both borrowers and broader economic reports.