Federal student loan repayments set to restart at end of month

It’s been more than 2 years since nearly 40 million Americans have had to repay their federal student loans.
Published: Aug. 2, 2022 at 5:46 PM CDT|Updated: Aug. 2, 2022 at 5:47 PM CDT
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BATON ROUGE, La. - It’s been more than 2 years since nearly 40 million Americans have had to repay their federal student loans due to the coronavirus pandemic.

By the end of this month, President Joe Biden will make a decision to either extend the pause or end it.

The Student Debt Crisis Center said three out of four people would struggle financially if they had to restart payments this month.

“I can’t think of actually a worse time for this administration to consider restarting student loan payments, you know, with gas at the pump skyrocketing the cost of everyday goods like food and you know other essentials like rent and housing going up, people across the country with student loans or not are really on financial thin ice,” executive director Cody Hounanian said.

Repayments could mean less cash flow for those with loans, this means they’re spending less and that could impact the economy, according to Louisiana State University finance professor, Dimuthu Ratnadiwakara.

“They are less likely to buy a home, start a family, so this can reduce the consumption and over a long period of time this can have an impact on the economic growth and the output these younger generations are adding to the economy,” Ratnadiwakara said.

He adds the loan repayments should be restarted slowly.

“We can expect a lot of defaults if they restart the student loan repayments suddenly because they didn’t plan, a lot of people wouldn’t have planned for these payments, and they would have purchased new vehicles, new homes may be so that their cash flows would be tight. So, if the payments start suddenly that will have a negative impact on their cash flows, and we would see a significant increase in the default rates of student loans.”

At the Student Debt Crisis Center, they want more borrowers to be relieved of their payments.

“Payments have been on pause for millions of Americans with federal student loans since March of 2020. The sky hasn’t fallen, the federal government hasn’t run out of money, it has worked for all those people that don’t have student loan payments,” Hounanian said.

The Department of Education encourages borrowers to log into their accounts and make sure they are on the bests repayment plan.

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