Most student loan borrowers are not ready to start repaying again
Yulia Petrova | instant | Getty Images
More than two-thirds of federal student loan borrowers say they are not ready to resume their monthly payments.
It is the observation of a investigation conducted for The Pew Charitable Trusts, which comes as the US Department of Education’s payment hiatus and interest exemption for borrowers expire at the end of September.
About 60% of borrowers who take the aid said they use the extra money for essential expenses, including rent and food. The average bill for a student loan is around $ 400 per month.
âThis shows that while the economy is recovering, not all households are, so the student loan hiatus continues to be a major lifeline for borrowers,â said Regan fitzgerald, Director of The Pew Charitable Trusts Student Success Success Project.
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There are signs the White House is considering an extension.
US Secretary of Education Miguel Cardona Told the Senate Appropriations Committee in June that he was involved in conversations about whether October was the best time to resume payments. In May, at an Education Writers Association conference, Cardona said extending the payment break was on the table.
At the same time, a recent change in the service of student loans could work in favor of borrowers.
The Pennsylvania Higher Education Assistance Agency – which oversees the loans of 8.5 million student borrowers – announced this month that it will not renew its contract with the federal government when it expires in December. As a result, these borrowers will need to be matched with a new lender.
“It would be confusing for PHEAA borrowers to start repayment again on September 30, to change agent on December 14,” said a higher education expert. Marc Kantrowitz. “It would be better to combine the two changes so that they happen at the same time.”
Democratic lawmakers and student loan advocates are pushing for an extension.
Senator Elizabeth Warren, D-Mass., And Senate Majority Leader Chuck Schumer, DN.Y., sent a letter in June to President Joe Biden, urging him to keep the payment break in effect until March 2022. That would mean most borrowers would not have made a payment on their student loans in two years.
Over 120 organizations, including the American Civil Liberties Union, the National Consumer Law Center, and the Consumer Federation of America, also recently wrote to the president, asking him to extend the payment break until the student debt is canceled.
Borrowers were in trouble before Covid, with more than 1 in 4 in default or in default. After more than a year of record unemployment, this pain has only worsened. The Congress Budget Office recently predicts that unemployment rates for young workers will be slower to improve than the overall rate.
âThe best guess is that the payment break and interest waiver will be extended if college graduate unemployment rates have not yet normalized by September 30, 2021,â Kantrowitz said.
Still, Kantrowitz said borrowers may be underestimating how ready they are to resume payments after such a long hiatus.
âWhat people say and what people do are often two entirely different things,â he said.