Posted on 10/01/23
| News Source: The Hill
Student loan payments officially resume Sunday after borrowers were let off the hook for more than three years by a pause initiated during the economic turmoil of the coronavirus pandemic.
Despite continued pushback from advocates and concerns about a government shutdown, the Biden administration is reactivating all student loan accounts, and more than 28 million borrowers now have to deal with repayments.
“It’s a sad day for student loan borrowers and for the country that student loans have to come back on, especially with the threat of a looming government shutdown, potentially on the same day. It’s just wild,” Natalia Abrams, president and founder of the Student Debt Crisis Center, said earlier this week.
Back in July, a Life and My Finances survey found half of borrowers say they don’t make enough to afford their student loan payments, while only 22 percent at the time had a plan on how to make their payments.
Some borrowers are going on a “student debt strike” and refusing to make payments as a way to show their discontent with the system.
Meanwhile, President Biden, who had made relief a key pledge of his 2020 campaign, has released an “on-ramp” repayment plan that allows borrowers to miss their monthly payments for the next year with fewer consequences than before. The Department of Education will not put borrowers in delinquent status if they miss payments, garnish their wages or send them to debt collectors.
But borrowers will still see interest accrue on their loans, and their credit score could be affected, despite the department saying they won’t report the missed payments to credit card companies.
“There could be situations where potentially because you’re not making your payments, the value of your loan is increasing because it’s collecting interest, so you will owe more money. The credit bureau takes that into account, and maybe your credit score gets dinged a little bit,” said Jacob Channel, senior economist and student loan repayment expert at Lending Tree.
Before the pandemic pause began, it was already known that student loans were dragging down the finances of millions of Americans and affecting major life decisions.