During the pandemic, millions of Americans were able to avoid paying their monthly student loan debts. However, the clock is ticking and payments will have to be made again.
Beginning in October, student loans will have to be paid. At that moment, interest will begin to accrue once more. Borrowers will pay 1% more in interest as a result of this than they did in 2019. Although rates are still low in comparison to prior years, Forbes estimated that the higher rates will cost borrowers an extra $590 for every $10,000 borrowed during a 10-year payback period.
Joe Biden failed to deliver his student loan debt promise
The coming end of the payment pause, along with rising interest rates, is bad news for millions of borrowers who have been able to remain out of debt since its payments were paused. For millions of Americans, student loan debt has been only one of many balls in a long-running juggling act of financial difficulties.
Many people were disappointed when President Joe Biden failed to deliver on his campaign pledge of wiping off $10,000 in student debt per individual. It has been many months since his election, and he has not talked or done much about the situation. If Biden does not move on debt relief, the student-loan situation will likely worsen, increasing the list of people's financial problems, as per KAKE.
The $1.7 trillion in national student-loan debt is shared by 43 million borrowers. In 2019, 15.1 million borrowers aged 25 to 34, accounting for a significant portion of the millennial generation, owing to an average debt of $33,000.
Many millennials have been unable to achieve life milestones such as purchasing a home, moving out of their parent's basements, or relocating to the desired location because of the financial burden. Student loans are also contributing to the widening of the generational wealth divide.
If not canceled, millenials face financial challenges from student loan
According to a survey by Boston College's Center for Retirement Research, millennials aged 28 to 38 would have a 76 percent net wealth-to-income ratio if student loans do not exist, which is greater than their present 56 percent wealth-to-income ratio. Student debt is especially distressing for individuals who have found themselves at the bottom of the intergenerational millennial income gap that the pandemic has worsened.
This segment was more likely to have lower wages before the outbreak and to use down their savings when faced with layoffs or wage cutbacks. The payment freeze is only a short-term solution to the country's debt problems.
Travel research group Upgraded Points noted that borrowers have saved $2,000 on average in interest during this time. And while those couple thousand dollars could have been crucial in keeping borrowers in the black during pandemic-related hardships, these borrowers are still far from climbing out of the holes they dug to pay for an education. When the pause ends, people who are suffering may find themselves even deeper buried in student debt than before, following a year of falling more behind financially in other areas.
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