As federal student loan payments are set to resume in September, many borrowers will have to choose between paying for necessities or sinking into debt, according to CNBC. Student loan payments have been suspended for three years since the COVID pandemic and the first payment will be due in October. More than half of the borrowers say that the resumption of payments will hamper the financial security their households have found over the past few years.
For some, making student loan payments means cutting down on nonessential spending. Other debts will also add to financial stress including those with credit card debt, mortgages, and auto loans. According to Credit Karma, 72% of borrowers say that they will prioritize their student loan payments over other debts, but many still expect not to meet their payments with 45% expecting their loans to go delinquent. Until of the end of September 2024, however, borrowers can miss or make late payments over a 12 month period without being considered delinquent or being reported to credit agencies.
CNBC reports, “the finding is in line with what the Biden administration and many experts have long feared. Though the brunt of the pandemic is in the rearview mirror and inflation is down from its meteoric rise last year, resuming student loan payments is likely going to hurt millions of households that had found some financial security over the past three years.”
The financial impact of resuming student loan payments is also expected to affect higher income earners. According to Credit Karma, 45% of borrowers with household incomes of $100,000 or more say that they will need to make financial decisions in order to make the payments.
CNBC reports a few options people may have to ease the financial burden of resuming student loan payments. Among the recommendations are using federal loan protections to keep loans in good standing, negotiating other bills such as rent, medical, or cell phone bills if possible, and auditing discretionary spending to decide what is worth paying for and what can be canceled.