As millions of student-loan borrowers prepare to restart student-loan payments after a three-year pause, a new study conducted by TransUnion warns that some could be facing substantial monthly bills, putting a strain on their finances.
Concerns persist over the economic impact of the impending resumption of student-loan payments. (Photo: KYMA)
Impact of the Resumption of Student-Loan Payments
According to TransUnion’s study, approximately 50% of borrowers analyzed will face monthly payments exceeding $200, while one in five will be burdened with payments of over $500 due to the resumption of student-loan payments.
The sudden financial obligation could force borrowers to dip into their savings to meet their new loan repayment requirements. To mitigate the potential financial strain on borrowers, the Education Department introduced a series of temporary safeguards.
These include a 12-month “on-ramp” period during which borrowers who miss payments won’t be reported to credit agencies, but interest will continue to accrue.
Additionally, the department plans to implement a new income-driven repayment plan to reduce monthly payment amounts. Despite these measures, concerns persist over the economic impact of the impending resumption of student-loan payments.
Economic Implications of Student-Loan Payments Resumption
According to Business Insider, the resurgence of student-loan payments could have significant effects on the economy. As borrowers divert funds to repay their loans, consumer spending is expected to take a hit.
Researchers predict that borrowers may reduce spending at major retailers, potentially leading to broader economic implications.
The reduction in consumer spending might be particularly pronounced among lower-income borrowers, who may struggle to support their total spending with the added loan payments.
As student-loan payments resume, borrowers will likely have to make difficult choices regarding their spending. Lower-income borrowers may have to cut back on discretionary services such as leisure, entertainment, and travel to accommodate their loan obligations.
With student-loan payments resuming after a long pause, borrowers face the challenge of adjusting to newfound financial obligations.
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