WSJ: student loans restrictions coming for schools with bad graduate repayment data

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The administration is invoking rules that allow the government to shut off the federal student-loan spigot for specific schools if too many of their former students have lapsed on payments, according to a notice the Education Department sent Monday.

The government has long had the power to restrict federal student aid if too many students don’t pay it back—a check intended to make sure the government isn’t on the hook for degrees that don’t pay off for graduates. Losing eligibility for federal aid is a potentially devastating blow to a school’s ability to attract students.

A far bigger group of schools is now at risk because so many students never resumed paying back their loans after a pandemic pause. Nearly 10 million borrowers are either already in default or on the cusp, the Education Department says. Within a few months, roughly a quarter of borrowers nationwide could be in default, meaning they are at least nine months behind on payments.

For many borrowers, the urgency of repayment is a shock after the policies of the Biden administration, which tried to cancel swaths of student debt.

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