Trump Admin is Coming for Student loan Borrowers….

The clock started ticking on a financial time bomb this week for student loan borrowers — those in default will now be referred to debt collections.

Why it matters: Because of the messy state of the student loan world, the economic fallout could be far more widespread than anticipated, hitting some who typically would be able to pay back loans.

• It also comes amid recession fears, worries over higher inflation, and a slowdown in hiring.

By the numbers: The 5.3 million who already are in default could see the federal government garnish their wages, Social Security benefits or tax refunds.

• Many more are in limbo. Some 20% of borrowers are in delinquency, but not yet at the default line — more than 270 days past due — according to a report earlier this week from credit agency TransUnion.
• That’s up from 11.5% in February 2020, when the federal government stopped asking people to pay on their loans.

Between the lines: Before 2020, typical defaulters, and those most at risk for default, were more likely to be older, low-income, people of color, those who attended for-profit schools or had dropped out of school.

• Now because of policy chaos, more at-risk borrowers are outside those confines, says Constantine Yannelis, a financial economics professor at the University of Cambridge, who’s been studying student loans for more than a decade.
• “I’m most worried about young people who are just going to be tremendously confused by the student loan system,” he says, especially “given the complete disarray that we’re seeing in public institutions these these days.”…..

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