Most Student Loan Borrowers are Not Ready to Restart Payments May 1
After nearly two years since the federal student loan forbearance went into effect, payments are set to resume May 1. A new survey by the Student Debt Crisis Center found that 93% of student loan borrowers aren’t prepared for loan payments to restart, CNBC reported.
Most borrowers welcomed the student loan pause. Without monthly payments, borrowers were able to pay down other debts, build up savings or make other important purchases they’d held off. According to the Student Debt Crisis Center, 85% of survey respondents reported they depend on the financial relief from the payment pause, with low-income and working-class borrowers more likely to use these monthly savings to pay for food, healthcare or medicine.
Now, one-in-three borrowers say they reduced spending on food, rent and healthcare in preparation for payments to restart, the survey found.
Since the suspension of payments, the cost of living has drastically changed. Approximately 92% of fully-employed borrowers are concerned about being able to afford their payments due to rising inflation.
According to the Consumer Price Index, the cost of consumer goods is up 7.5%, which is the fastest annual pace in about 40 years, GOBankingRates reported. While wages have risen, inflation has also reduced pay by 1.7% over the past year.
“Our findings show that the ongoing pandemic combined with unprecedented inflation are huge obstacles for borrowers who are, by and large, not ready to resume payments, struggling to afford basic needs, and confused about their options moving forward,” said Natalia Abrams, President and Founder of the Student Debt Crisis Center. “To meet this moment, we call for broad debt cancellation to repair the harm caused by this crisis and a roadmap to help borrowers navigate the uncertain future.”