LEILA FADEL, HOST:
More than 5 million Americans are in default on student loans. The Trump administration ended a five-year pause on repayments that began during the pandemic. So people in default have to start paying down their debt.
MICHEL MARTIN, HOST:
Mandatory repayments began last week. Charlie Wise is tracking the impact on borrowers. He is a senior vice president at TransUnion. That's one of the big three credit agencies.
CHARLIE WISE: They've gotten very used to their finances without having to make that payment, and now they have to make room for that additional payment every month on their student loans in their finances. And some consumers are struggling to make those payments.
FADEL: We asked NPR listeners how hard it will be to make these payments. Here's what we heard from Catherine Wooten (ph), Michael Harris (ph) and Jay Dia Castillo (ph).
CATHERINE WOOTEN: It's going to be hard to make ends meet.
MICHAEL HARRIS: I don't know what to do. I'm very anxious that they may begin garnishment soon.
JAY DIA CASTILLO: I would probably have to get a second job to even be able to afford the rent.
MARTIN: TransUnion's Charlie Wise says borrowers will have to make tough decisions.
WISE: Consumers who are constrained are always having to make trade-offs. What can they maybe put off? Where can they economize to make things happen? And what we have typically seen is that student loans tend to fall lower in what we call the payment hierarchy compared to other types of credit products - mortgages, auto loans, credit card payments, et cetera.
FADEL: But Jessica De la Berto (ph), Sean Stevens (ph) and Amy Tibble (ph) say even tough choices didn't prepare them for their high bills.
JESSICA DE LA BERTO: I wasn't expecting to plan for a thousand-dollar student loan payment.
SEAN STEVENS: They were quoting me $800 a month.
AMY TIBBLE: Having to pay my $900 monthly payment has been really suffocating.
MARTIN: If you cannot repay, Wise says, the cost will be severe.
WISE: Your credit score will very likely take a hit. In some cases, a significant hit because of that major derogatory or major negative on your credit report. And what we've seen is that the hit is actually most significant or severe to those borrowers who have very good or excellent credit scores.
FADEL: So what should you do if you're behind on payments?
WISE: Reach out to your loan servicer to see if there's any types of programs that they may be eligible for. But the reality is that consumers need to find a way to make their payments if they want to preserve their credit scores, if they want to be in a position to purchase a home and take out a mortgage or to buy a vehicle and get an affordable auto loan.
MARTIN: Wise says prepare for long waits on the phone and going forward...
WISE: It really starts with resuming making payments as soon as possible. Today is the best day to start. Tomorrow is the next best day. And so with time, everything on your credit report will improve if you start or resume making those payments.
FADEL: So getting a full picture of what you have to pay and where you can stop spending will get you into better financial shape and boost those scores.
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