The month of October marks the beginning of something much scarier than ghouls, ghosts and werewolves: student loan payments restart.
For three-and-a-half years, student college loan payments for more than 44 million borrowers in the country were paused. Now, that period has ended and borrowers are required to resume making their monthly payments.
The good news for borrowers is that interest rates from that three-year period was 0%, according to the Federal Student Aid office of the U.S. Department of Education.
Within the three-year pause period, the conversation around student loans has gotten more bleak. It’s become a divisive issue among age groups such as Gen-Z/Millennials and older generations. It’s also become heated topic between liberals/progressives, who’ve largely supported debt forgiveness, and conservatives, who believe borrowers should repay their loans on their own.
Last summer the Supreme Court struck down President Joe Biden’s student debt relief plan that would have removed $10,000 of debt from qualified individual borrowers.
To his credit, the president has found ways to circumvent the court’s action.
On Oct. 4 he announced on X (formerly known as Twitter) that his administration had approved $9 billion of student loan forgiveness for 125,000 borrowers via fixes to income-driven repayment and Public Service Loan Forgiveness. That brings the total student loan debt his administration has canceled to $127 billion. That is great news for those borrowers but still feels like a drop in the proverbial bucket when comparing to the $1.8 trillion in debt held by 44 million borrowers.
Student loan debt is going nowhere, and neither will its ripple effects.
Student loan debt effects
Kaitlin Blanchard, a 28-year-old St. Elmo resident and data analyst, has started paying on her loans again.
“It’s been more confusing than I have anticipated to start out,” Blanchard said last week. “Just being able to log on to my student loan handler’s website and trying to find what I already paid versus what I still owed was a little confusing.”
Blanchard went to UT-Knoxville, and as a student from Ohio, she had to pay out-of state tuition, which made her loans higher than her in-state classmates. Her parents took out a Parent Plus loan, which is an unsubsidized loan made to parents of dependent undergraduate students.
Though the loan is not directly tied to Blanchard, the debt affects her.
“My parents are getting older, and it’s a lot to handle managing my payments back on the Parent Plus loans on top of any [medical costs] they may have,” she said.
Students and parents borrowed more than $94.7 billion in the 2021-22 academic year (11% of that sum was in Parent Plus loans), according to Lending Tree.
In a perfect world, student loans would be the only debt new graduates and young working adults have to worry about, but that’s not the case: many have to manage car loans, high rent costs and credit card debt.
“The student loan debt is always right there, and it makes me feel like I can’t move forward,” Blanchard said about juggling student loans with other expenses.
Blanchard said her student loans are twice the amount of the national average of 37,000. An average monthly student loan payment is $337, according to the Motley Fool.
Higher education can be the launch pad for young adults to improve their circumstances. Research shows that those with a college degree earn far more over their lifetimes than those who don’t have a degree. But the burden of paying for that degree — often over decades — can keep adults (and their families) from truly securing their financial futures.
Let Americans be the best they can
If you were to look at student loan debt through a neutral lens, sure, it’s not complicated: You sign a contract and you repay the loan. But the issue is way more nuanced.
GenZ and Millennials are not the only ones who suffer from the burden of student loan debt. Their parents are affected by it. Siblings may not get the chance to go to college because their parents are still paying the loans of an older children.
The truth of the matter is that when one American succeeds, someone down the street does too. Our country’s success is connected. Say someone had $10,000 worth of debt forgiven and that gave them the ability to buy a house. The new homeowner will need the services of a plumber, electrician or roofer. That small business owner down the street now has a new customer to help keep his business afloat.
The debt repayments that 44 million people now face will take money out of the American economy, effective this month. Borrowers will face hard choices every month.
Let’s remind ourselves that the pause period began because the COVID-19 pandemic created havoc in the economy, and millions of Americans lost jobs and struggled.
Student loan debt is an American problem with tricky legal and political challenges. The only way that we can fix it is together — for the economic prosperity of our country.