A temporary suspension on student loan repayments was introduced by Congress to relieve some of the economic burdens on consumers during the COVID-19 pandemic.
After being extended several times, the scheme has now been running for over two years. However, unless President Biden extends it again, the pause is due to end on August 31st.
How will this affect borrowers?
Approximately 43 million US citizens have federal student loan debt. The average balance is $37,667 and, despite calls for loan forgiveness, this figure keeps rising.
In a survey conducted by ScoreSense, most borrowers said that resuming student loan payments next month will lead to financial hardship.
The survey found that only 14% of respondents can comfortably afford the repayments when the suspension ends and 42% are worried about how it will affect their monthly budget.
During the payment pause, almost a quarter of respondents said they used the money to pay off other debts and loans, with others saying they invested the money in the stock market.
Younger borrowers were the most likely to rely on others when resuming payments. Around 25% of those aged 18-34 said they would ask for family members to support them with their student loan repayments.
Is loan forgiveness an option?
Many student loan holders are struggling more financially now than they were before the pandemic. With higher prices and interest rates, borrowers say they will struggle to pay back their student loans on their current budget.
Some members of Congress are urging for some student loan debt to be forgiven. However, surveys show that a high number of Americans are concerned that it would make inflation worse.
Additionally, taxpayers who didn’t attend college and have no student loan debt are much less likely to support the idea, as the money to wipe out student loan debt could be spent on something with universal benefits.