19 July 2023
Millions of Americans are bracing for a significant blow to their household budgets as federal student loan payments resume in September, according to a new study by TransUnion. The report reveals that around 27 million student debt holders, who have been granted a freeze during the pandemic that lasted over three years, will now have to resume payments. For a significant portion of these borrowers, approximately half, the monthly payment will exceed $200, while one in five will face payments exceeding $500. This abrupt increase in financial obligations is expected to create a payment shock, requiring borrowers to readjust their monthly budgets. The restart of student loan payments adds to the financial challenges faced by US consumers, who have already endured rising interest rates and accumulated additional debts during the pandemic. Older borrowers, burdened with higher student loan debts, will face even larger monthly payments. Despite the Biden administration’s attempts to alleviate the debt burden through loan forgiveness, the Supreme Court blocked these efforts. The White House has introduced a 12-month program to soften the impact of payment resumption, allowing borrowers who miss payments until September 2024 to avoid delinquency or negative credit reporting, although interest will continue to accumulate.