June 6, 2023
WASHINGTON (AP) — In a good month, Celina Chanthanouvong has about $200 left after rent, groceries and car insurance. That doesn’t factor in her student loans, which have been on hold since the start of the pandemic and are estimated to cost $300 a month. The pause in repayment has been a lifeline keeping the 25-year-old afloat.
“I don’t even know where I would begin to budget that money,” said Chanthanouvong, who works in marketing in San Francisco.
Now, after more than three years, the lifeline is being pulled away.
More than 40 million Americans will be on the hook for federal student loan payments starting in late August under the terms of a debt ceiling deal approved by Congress last week. The Biden administration has been targeting that timeline for months, but the deal ends any hope of a further extension of the pause, which has been prolonged while the Supreme Court decides the president’s debt cancellation.
Without cancellation, the Education Department predicts borrowers will fall behind on their loans at historic rates. Among the most vulnerable are those who finished college during the pandemic. Millions have never had to make a loan payment, and their bills will soon come amid soaring inflation and forecasts of economic recession.
Advocates fear it will add a financial burden that younger borrowers can’t afford.
“I worry that we’re going to see levels of default of new graduates that we’ve never seen before,” said Natalia Abrams, president of the nonprofit Student Debt Crisis Center.
Chanthanouvong earned a bachelor’s in sociology from the University of California-Merced in 2019. She couldn’t find a job for a year, leaving her to rely on odd jobs for income. She found a full-time job last year, but at $70,000, her salary barely covers the cost of living in the Bay Area.