Student record

A pandemic relief program has offered a lifeline to struggling student borrowers. Most never knew | Smart Change: Personal Finances

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Mallika Mitra

In the late 1980s, Patricia Gary borrowed $6,600 in federal student loans to pay for her beauty studies, a move she felt was necessary as computers began to replace typewriters and her job skills failed. did not translate.

More than 30 years later, Gary has paid over $22,000 for the loans, which she defaulted on in the 1990s. She still owes around $4,000.

“It’s a debt that never seems to go away,” says Gary, now 73.

Gary, who was born in Guyana in South America but has lived much of her life in Bronx, New York, says the default has affected every aspect of her life. She had to decide whether or not to buy medicine and how much food she can afford, as the government took part of her social security payments through collections.

Unfortunately, she’s not alone: ​​millions of borrowers are in default on their student loans, which means they haven’t repaid their loans for at least 9 months. Failure to pay can have long-term consequences, including damaging borrowers’ credit scores and depleting other sources of revenue through government collections. Yet during the pandemic, defaulting borrowers had a unique opportunity to escape their predicament. The problem? They didn’t know.

A little-known provision of the CARES (Coronavirus Aid, Relief, and Economic Security Act) passed in March 2020 could have helped many borrowers out of default altogether. But the latest data from the Department of Education shows that of the 7.7 million borrowers with federally held loans that were in default when the pandemic began, more than 92% are still in default. In addition to borrowers ignoring the opportunity, advocates say the process is onerous for people already in dire financial straits.