June 7, 2021
For millions of Americans, there’s an unwelcome side of the return to business-as-usual after the pandemic: They’ll have to start repaying their student loans again.
More than 40 million holders of federal loans are due to start making monthly instalments again on Oct. 1, when the freeze imposed as part of Covid-19 relief measures is due to run out. It covered payments worth about $7 billion a month, the Federal Reserve Bank of New York estimated. Their resumption will eat a chunk out of household budgets, in a potential drag on the consumer recovery.
Before the debt freeze, a large share of student loans weren’t being repaid.
Americans now owe about $1.7 trillion of student debt, more than twice the size of their credit-card liabilities. Politicians recognize it’s not sustainable. Yet for all the talk of loan forgiveness during last year’s election campaign — including from President Joe Biden, who promised to write off at least $10,000 per borrower — there’s been no progress toward shrinking the pile.
Graduates fresh out of college or postgrad programs, when incomes are typically lower, tend to find payment especially hard. Since the U.S. economy is still 7.6 million jobs short of pre-pandemic levels, many more of them are likely to be out of work now.