Many Student Loans Were Going Unpaid Even Pre-Pandemic

Number of the Day: The most relevant or interesting figure in personal finance

Number of the Day

That’s how many federal student loans weren’t being paid before COVID-19, suggesting student debt was unmanageable for many people well before the government suspended payment obligations because of the pandemic crush on the economy.

At the end of 2019, 14.1 million of the 34.1 million federally held student loans that should have been getting paid were either in default, deferment, or forbearance, according to data from the National Student Loan Data System. And that doesn’t count any of the loans in an income-driven repayment plan requiring $0 payment (because the borrower doesn’t make enough money). That’s millions more, according to estimates. 

Advocates for wiping out a portion of everyone’s student loan balance point to these numbers as evidence the student loan system is broken. And it’s become even more clear since the government suspended all payment obligations at the start of the pandemic two years ago, they say. The lengthy forbearance period—which has also stopped any interest from accruing—has changed lives, giving some borrowers breathing room to catch up on snowballing debt, and others to buy houses, invest, or start families. 

President Joe Biden hasn’t ruled out extending the forbearance beyond the latest Aug. 31 expiration date and is reportedly on the verge of canceling $10,000 of debt per borrower, according to the Washington Post. 

All of this shows the student loan system is at a crossroads: Borrowers and their advocates say they’ve been unfairly forced to take on crushing debt necessary for increasingly expensive higher education. Critics say letting student loan borrowers off the hook unfairly penalizes those who didn’t borrow and has even contributed to today’s soaring inflation.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Article Sources