The student loan time bomb!
“Don’t worry about it, they said, don’t get a job while taking your classes, just take another loan. No need to worry about those loans, you don’t have to repay them until after you graduate. Go get that new car or house, take those vacations, charge up those credit cards, those loans are in deferment due to COVID and Biden said he was going to forgive them all.”
Well, more than 5 million people who took those loans and stopped or never made payments are in a state of SHOCK! Those loans were not forgiven, they are now past due as of May 5th, and the time bomb has just exploded across the country as those loans are in default and credit agencies are reporting credit scores dropping by more than 100 points for some people!
It’s not just about the additional monthly payments people will have to deal with, but with that information hitting the credit agencies, what is the impact on ALL your other credit agreements? Is your vehicle loan in trouble? Are your credit cards going to be shut down or credit lines reduced? What about obtaining new credit?
What if you have clients that were pre-approved for a mortgage and have entered into a contract to buy a house? At the time, credit was fine, you allowed for all of their current payments, ran all the numbers, got ready to close and BOOM! the borrower’s credit score has dropped 100 points and don’t meet the credit requirements, their student loan repayment is now significantly higher than was estimated making their DTI skyrocket! and let’s not even think about if they are now in default!
How many people do you have out there with YOUR preapproval that are looking to purchase a house and have NOT met the repayment requirements as of May 5th and that information is now making its way into the credit agencies? If you don’t know the answer to this question, you need to go and find out NOW
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