The feds betrayed student borrowers; NYC didn’t

Every three seconds, another American falls into default on their student loans. A major crisis is brewing — one most people won’t see until it hits their paycheck.
Maria, a working mother in the Bronx, earns $56,000 a year. Her student loan payments were paused during the pandemic emergency. But then her $1,584 monthly bill came due again overnight. She missed payments and her credit score dropped 85 points. She did not know a federal program could cut her payment to less than $100 a month. No one told her.
There are millions of Marias. Student loan delinquency has exploded to 25% of those in debt — nearly triple the pre-pandemic rate. Nearly 9 million are now in outright default, most for the first time. Their credit scores drop by 57 points on average, effectively blocking an affordable car loan, apartment lease, or home mortgage.
There is worse to come. Later this year, the federal government plans to resume wage garnishment and tax refund offsets for borrowers in default, stripping hundreds of dollars from people’s paychecks. For families on the financial edge, that will not be a warning. It will be a shock.
I have worked to prevent exactly this kind of harm, first at the Consumer Financial Protection Bureau and then at the Office of Federal Student Aid. In both roles, I saw the yawning gap between the help people are entitled to and the help they actually receive.
The most important tool for student loan borrowers is Income-Driven Repayment (IDR), which caps monthly payments as a share of discretionary income. That’s the difference between a manageable bill and a financial freefall. But IDR only works if people can find it and enroll in it. Too often, people who desperately need relief do not get it.
The biggest city in America is not waiting for Washington to fix this. New York City now offers free, personalized support to all 1.4 million residents carrying student debt. The program, available at NYC.gov/StudentLoans, partners with Summer, a leading student loan advisory service.
In as little as 10 minutes, a resident can answer basic questions and enroll — cutting their monthly payment by hundreds of dollars. Parents can also receive free guidance on college savings planning to get ahead of the problem.
The results are striking. New Yorkers using the program have reduced their payments by $478 a month — nearly $5,700 a year — an 11% boost in their average take-home pay. So far, the initiative is returning more than $70 million to New Yorkers — far more than the 3-year program cost. That money pays for rent, child care, and groceries, helping local businesses earn sales tax revenue for the city.
This is what good governance looks like: a serious problem matched with a serious program that meets people where they are. Partnerships other cities can replicate. No new law was required. Just leadership, urgency, and a commitment to action.
Thankfully, this program reduced Maria’s payment to less than $100 a month. She doubled her disposable income and is current on her loans for the first time in a year. She got lucky. Millions of borrowers in other cities have no equivalent safety net.
I hope the mayors of every other city in America are paying attention. I hope Gov. Hochul and her colleagues are too. None of the 43 million student loan borrowers in this country should fall through the cracks.
New York proved it doesn’t take a miracle to solve this problem. The question now is “Which city will step up next?”
Cordray was the first director of the U.S. Consumer Financial Protection Bureau. He later served as COO of Federal Student Aid, overseeing the federal student loan portfolio and the cancellation of $127 billion in student debt for 3.6 million borrowers.