Without Student Loan Forgiveness, the Average American Will Have $393 Cut From Their Monthly Budget
The moratorium on federal student loan payments is set to end Aug. 31, 2022. And when it does, “millions of borrowers might face a difficult road,” per a new report from the Consumer Financial Protection Bureau (CFPB).
The study explored the financial situations of 34 million borrowers. The CFPB found that five risk factors could contribute to future loan delinquencies once payments resume.
According to the report, the risk factors are:
- Pre-pandemic delinquencies on student loans.
- Pre-pandemic payment assistance for student loans.
- Multiple student loan servicers.
- Delinquencies on other credit products since the pandemic began.
- New third-party collections during the pandemic.
More than 5 million borrowers exhibited at least two of the risk factors, according to the CFPB study.
For those who are able to pay their student loan debt once payments resume, doing so could also represent financial hardship. The study showed that the median student loan borrower saved $133 monthly when payments were suspended during the pandemic.
Experts from the Roosevelt Institute said that the average student loan borrower was making payments of $393 per month prior to the pandemic, making the impact on household budgets when those payments resume substantial.
The Roosevelt Institute also detailed that Black and Latinx households would be disproportionately impacted by the resumption of student loan payments. A recent issue brief from the organization found that canceling up to $50,000 of student loan debt per borrower “would immediately increase the wealth of Black Americans by 40%.”
President Joe Biden recently indicated to legislators that he is taking forgiveness under consideration and will make a decision before Aug. 31, 2022, when payments on federal student loans are slated to resume.
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