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Student loan borrowers are set to resume payments; low-and-middle income households will be impacted


For three years, student-loan borrowers did not have to make any payments toward the reimbursement of their education. Since October 1st, the U.S. government has reactivated these student loan payments. This means $1.7 trillion in merely student loan payments is due.

After several extensions by both the Trump and Biden administrations, the pause finally expired after Congress prohibited the President from extending it another time. This is the first time in over three years that borrowers will have to make payments on their federal student loans, due to the COVID-19 pandemic payment pause.

Some important things that borrowers need to know about resuming their payments. First, interest has been accruing on federal student loans since September 1, 2023. This means that borrowers owe more on their loans now than they did before the payment pause.

Second, borrowers will have a grace period through September 30, 2024. During this time, borrowers will not be reported as delinquent to credit bureaus for missing payments. However, they will still owe interest on their loans, and their loan balances will continue to grow.

Third, borrowers have a few options for resuming payments. They can make the standard payment, which is based on their loan balance and interest rate. They can also choose to make a higher payment to pay their loans off faster. Or, they can apply for a different repayment plan, such as income-driven repayment, which sets payments based on their income and family size.

The payments of these loans will undeniably affect low-income and middle-income households the most. Borrowers from these households may have difficulty affording their monthly payments, which can lead to financial hardship and stress. And these student loan payments will impact these households in the following ways:

First, these loan payments will reduce their disposable income. Student loan payments can reduce the amount of money that borrowers have available for other expenses, such as rent, food, and childcare. This can make it difficult for borrowers to make ends meet.

Second, these loans will delay financial milestones. Indeed, student loan debt can delay borrowers' ability to reach important financial milestones, such as buying a home or saving for retirement.

Third, these loans will increase financial stress, which is the cause of stress for most Americans. Student loan debt can be a major source of financial stress for borrowers. This stress can lead to health problems, relationship problems, and other negative consequences.

Low-income and middle-income borrowers are particularly vulnerable to the negative effects of student loan payments. This is because they are more likely to have lower incomes and higher debt-to-income ratios.

The COVID-19 pandemic has made the situation even more difficult for low-income and middle-income borrowers. Many borrowers lost their jobs or had their incomes reduced during the pandemic. This has made it even more difficult for them to afford their student loan payments.

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