Student loan restart causes less economic hit than expected
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Student loan payments resumed after a COVID pause, but the economic impact is less than expected since many borrowers are not paying yet. Only 60% of borrowers with payments due made them in October.
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Many borrowers are confused or overwhelmed about their options. Some are taking advantage of the Biden Administration's income-based payment and loan forgiveness programs.
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Economists originally predicted the resumed payments could slow economic growth by up to 0.3 percentage points. But with so many not paying, the hit is now expected to be just 0.1 - 0.2 percentage points.
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Alternatives like a 12-month grace period, more generous income-based repayment plans, and expanded debt cancellation are softening the economic impact as payments resume.
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Even before the payment pause, student loans were a small share (0.4%) of GDP. So economists say the payments resuming is not enough to severely hurt the broader economy.