#Borrowers stare down student loan repayments after years of high inflation

Student loan borrowers are frustrated and anxious only three months away from being forced to resume payments after a three-year hiatus. 

For the roughly 40 million Americans who owe the federal government student loans, interest will begin accruing on that debt in September. Payments will be due again in the beginning of October. 

As the three-year pause comes to a close and the Supreme Court determines the fate of student loan forgiveness, borrowers are scrambling to put together a budget and figure out their loan situation as they worry the impending debt will delay other goals they have for the future.

Why the payment pause may be gone for good

Student borrowers have been off the hook for federal loans since March 2020 after former President Trump issued an executive order pausing interest accrual and payments on loans owed to the government.

Despite several previous extensions, student loan borrowers had to give up the hope of another after the debt ceiling deal struck between President Biden and Speaker of the House Kevin McCarthy (R-Calif.) officially set the pause to expire.

Student borrower advocates and progressives slammed Biden for agreeing to the decision, saying the president betrayed their trust by agreeing to turn back on payments before knowing the fate of student debt relief.

Student loan debt: Borrowers brace for Supreme Court decision

The Supreme Court is set to rule this week on whether Biden’s executive order wiping out up to $20,000 in student loans for millions of Americans is constitutional.

Cody Hounanian, executive director of the Student Debt Crisis Center, says there are thousands of individuals who do not feel ready to restart payments. 

“We have surveyed tens of thousands of borrowers over the past three years and we are deeply concerned that many borrowers are still on financial thin ice,” Hounanian said.

“The long-term economic impacts of the pandemic, an unprecedented surge in inflation, and major changes in the federal student loan system have created insurmountable obstacles for many borrowers,” Hounanian said.

How borrowers are reacting to upcoming payments

For some, restarting payments is a sign that officials do not care about the welfare of student borrowers.

“I honestly felt like it was a smack in the face,” said Marcus Jones, a 23-year-old who works at a finance company.

“We’ve been through so much these past few years as students that most people couldn’t even imagine, and for there to not have been any change to occur or for just the deadline to even be extended again, it felt like they didn’t care,” Jones said.

Get ready: Partisan divide on student loan solutions about to get louder

With the end of the pause quickly approaching, some borrowers have started preparing for their monthly payments.

LyAsia Monroe, a financial analyst, said she has made a “feasible and not-stressful plan” to resume paying her loans but that she feels like “post-grad students like myself can’t live the American dream” because of her debt.

Cristian deRitis, deputy chief economist with Moody’s analytics, told The Hill that he expects many borrowers have been preparing for the pause to resume and that graduates who received financial benefits from their degrees should be able to handle to expense.

Even so, deRitis said, “There’s that group of borrowers that is closer to the edge in terms of financial stress … and this additional burden is going to cause them to have to make some tougher choices in terms of which bills to pay.”

Looming loan payments are forcing borrowers to rethink major life decisions, such as when to purchase a home.

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“It will absolutely prevent me from doing things such as buying a home, because it’s my largest debt I have,” said Keisha Medina, a psychometrist who has between $20,000 and $30,000 of student loan debt.

Borrowers are facing repayments in an uncertain economy

Record-high inflation has also caused household costs to increase significantly in the past year.

While there are signs that it may be easing, consumers are still feeling the burden — especially for housing.

Housing expenses remained a core driver of inflation last month, despite data showing that annual inflation growth hit its slowest pace in more than a year.

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DeRitis noted that student loan payments could pull back economic growth by about $86 billion per year, assuming millions of borrowers who do not receive additional forbearance begin paying about $300 per month.

“That’s significant,” deRitis said. “Probably not enough to push us into a recession alone but, combined with some of the other factors going on, the other headwinds the economy’s faced … it could be the straw that breaks the camel’s back.”

Yet the burden of payments could be lessened if borrowers set up income driven repayment plans (IDR), deRitis continued. 

Borrowers will have to keep a close eye on IDR options while the Biden administration is working on changes that aim to take effect next year. One such change includes cutting a person’s discretionary income that goes towards student loans from 10 percent to 5 percent.