EDITORIAL: Past due student loans are finally coming due

The student loan program is a case study in government mismanagement.

Last month, the Department of Education announced it will resume collecting on defaulted student loans. It hadn’t done so since March 2020. At that point, a pause was understandable. The COVID crisis was unfolding. Shutdown orders were about to grind the economy to a halt, making it difficult for many to repay their loans.

But even most triple-maskers will acknowledge that the COVID crisis has been over for years. Collections should have already resumed.

Congress previously required the federal government, which manages most of the country’s student loans, to start collecting payments in October 2023. The Biden administration, however, wasn’t interested. In 2022, former President Joe Biden attempted to forgive around $400 billion in student loans. In June 2023, the U.S. Supreme Court ruled the Biden administration lacked the authority to take such action unilaterally.

Despite an act of Congress and a rebuke from the Supreme Court, the Biden administration refused to restart collections. In total, the pause has cost taxpayers more than $225 billion. Many of those taxpayers either never went to college or paid off any debt they accrued to do so. But the Biden White House and other Democrats were intent on forcing them to subsidize well-off graduate students.

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

That’s likely to be a problem for millions of borrowers. One might have hoped that borrowers would have acted prudently and used this pause to save money or pay down their loans more quickly given the interest freeze. Instead, it seems many acted like they were no longer responsible for their debt. Shockingly, just 38 percent of student loan holders currently required to repay their loans are up to date on their payments.

The Education Department reported that “more than 5 million borrowers have not made a monthly payment in over 360 days and sit in default.” Another 4 million individuals are in “late-stage delinquency.” In all, almost a quarter of all federal student loan borrowers could soon be in default. There are already numerous programs that offer relief for borrowers and will help soften the blow. But many others facing delinquency are in for a rude awakening and face the potential of wage garnishments.

A private company wouldn’t survive if it acted like this. The five-year “pause” gave false hope to many borrowers as well. This fiasco is yet another reason why nationalizing the student loan business was a bad idea.