This article is reprinted by permission from NerdWallet. After more than three years of an interest-free payment pause on federal student loans, millions of Americans will soon be on the hook for monthly payments. The effects could be felt across the economy.
How resuming payments will affect a single borrower varies widely, depending on, among other things, whether they stopped making payments at all, how much debt they have, the repayment program they’re in, and their current and future expected income. It also depends on the other expenses competing for a piece of their monthly budget. Because so many people are affected — 43.6 million people hold federal student loan debt, according to the Department of Education — the impact to the economy stands to be broad even if some borrowers don’t have a difficult time adjusting. Currently, there is $1.6 trillion in federal student loan debt outstanding, according to data from the New York Fed’s first quarter Household Debt and Credit Report. This will come down by at least an estimated $39 billion (about 2.4%) before repayment begins, as long-time debtholders who have been paying for 20 years or more stand to have their slates cleared in a one-time adjustment recently announced by the Biden administration. The White House is also implementing a repayment plan that could significantly reduce the monthly payments due for some borrowers, and a 12-month “on ramp,” where debtholders who enter repayment in coming weeks will not face repercussions for paying late. These two efforts alone could soften and slow the economic effects of those reentering repayment. …
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How resuming payments will affect a single borrower varies widely, depending on, among other things, whether they stopped making payments at all, how much debt they have, the repayment program they’re in, and their current and future expected income. It also depends on the other expenses competing for a piece of their monthly budget. Because so many people are affected — 43.6 million people hold federal student loan debt, according to the Department of Education — the impact to the economy stands to be broad even if some borrowers don’t have a difficult time adjusting. Currently, there is $1.6 trillion in federal student loan debt outstanding, according to data from the New York Fed’s first quarter Household Debt and Credit Report. This will come down by at least an estimated $39 billion (about 2.4%) before repayment begins, as long-time debtholders who have been paying for 20 years or more stand to have their slates cleared in a one-time adjustment recently announced by the Biden administration. The White House is also implementing a repayment plan that could significantly reduce the monthly payments due for some borrowers, and a 12-month “on ramp,” where debtholders who enter repayment in coming weeks will not face repercussions for paying late. These two efforts alone could soften and slow the economic effects of those reentering repayment. …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]