Federal student loan payments will resume on February 1 despite campaign promises to reduce debt and demands from experts and lawmakers to maintain the halt.
During a briefing on Friday, White House press secretary Jen Psaki stated that the Biden administration is planning for a smooth transition back into repayment following a moratorium in March 2020 and two extensions by Presidents Donald Trump and Joe Biden.
Student Loan Forgiveness Is Important To 53% Of Debtors
Psaki stated that the administration is still evaluating the effect of the COVID-19 Omicron variant. The revelation follows an estimate by the Roosevelt Institute that 18 million borrowers will spend around $7 billion per month when they begin repaying their federal student loans after up to two years, resulting in an $85 billion loss to the US economy.
The analysis also concluded that if Biden exercised his executive authority and erased $50,000 in student loan debt per individual, the country’s gross domestic product would increase by more than $173 billion in the first year.
In a letter to Vice President Biden, Senate Majority Leader Chuck Schumer, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Ayanna Pressley, D-Massachusetts, cited findings from the Roosevelt Institute to urge Biden to at least continue the pause on federal student loan repayment until the economy returns to pre-recession employment levels.
The Supreme Court will hear oral arguments about President Joe Biden’s offer to forgive up to $20,000 in student loan debt for federal loan borrowers at the end of this month.
The majority of borrowers are certain of one thing: Their debt is preventing them from achieving financial security.
According to a recent Credit Karma survey of 1,009 adults in the United States, 53% of federal student loan borrowers believe their financial stability depends on their loans being forgiven.
Before you know it, summer will arrive, and with it, the return of student loan installments on or around June 30. However, it will be difficult for struggling debtors to reintroduce these payments into their budget.
Read more: What to do if you Social Security payment is delayed?
Payment Pause Is Not A Long-Term Solution
Due to the widespread forbearance initiated by former President Donald Trump, federal student loan borrowers have not been required to make a payment on their debts for three years as of next month.
Those borrowers who were able to keep up with their payments had the option to either continue making payments to accelerate their debt reduction or to take advantage of the pause and utilize the funds they would have used to pay off their debt for other purposes. Some borrowers were able to finance weddings, business ventures, and other financial objectives.
The majority of borrowers report that the payment suspension has made them feel more confident about their finances, but this sense of confidence may vanish when payments begin. Over half (56%) of poll respondents feel that not having to make payments is essential to their financial stability.
Although they may be more financially stable, more than one-quarter of borrowers report that they have not been able to save because the money they would have paid on their student loans is now being utilized for other purposes.
Last year was financially unpleasant for many Americans, regardless of whether or not they had student debt, as record-high inflation pushed up prices on practically everything from rent to eggs. Credit Karma says that nearly 70% of respondents claim their finances have remained the same or declined since last year.
A recent Gallup survey revealed comparable results: Half of Americans report their financial situation is worse now than it was a year ago.
Read more: You may receive 2 Social Security payments in March; Check if you’re one of them!
