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Minnesotans Brace for Federal Student Loan Payments to Resume in October After 3-Year Pandemic Pause

  • Federal student loan payments will resume in October after a 3-year pause during the pandemic. Many Minnesotans are seeking help to prepare.

  • A financial counselor has seen an increase in calls from borrowers looking for guidance on repayment options before the deadline.

  • Some borrowers are making financial sacrifices or working extra jobs to be able to afford payments.

  • The payment pause was originally intended to provide relief during pandemic hardships. Interest began accruing again in September.

  • Borrowers should update contact info, consider auto-pay discounts, and look into affordable repayment plans before October.

startribune.com
Relevant topic timeline:
Main Topic: Student borrowers considering various strategies to lighten their loan burdens as repayments resume. Key Points: 1. Some borrowers are jokingly citing scripture or discussing boycotts as ways to address their student loan debt. 2. Experts warn that deliberate nonpayment of student loans can have serious financial consequences, including garnished tax refunds and limited access to future student aid. 3. There are alternative avenues for reducing loan payments, such as forgiveness programs and income-driven repayment plans, that borrowers should explore.
More than 1.6 million people in Illinois, or 1 in 10 residents, owe a total of $63.7 billion in outstanding federal student loans, and as the freeze on loan payments comes to an end, borrowers are concerned about the financial burden they will face in the coming months.
As the student loan pause ends, borrowers are facing critical deadlines, such as requesting a refund for payments made during the pause and updating their repayment plan options before interest starts accruing on September 1.
Major retailers are concerned that the resumption of federal student loan payments in October will decrease profits during the holiday season, as the pause in payments since March 2020 has given Americans more buying power.
The impending resumption of student loan payments after a three-year pause due to the pandemic is causing financial strain for borrowers, potentially leading to defaults and economic repercussions, despite some borrowers using the pause to pay down debt and improve their financial situation.
Student loan repayment resuming in the US this fall is expected to have a significant negative impact on the housing market, potentially affecting homeownership rates for at least a year, according to a poll conducted by Pulsenomics.
Millions of Americans may have to prioritize their student loan payments over their retirement savings, as the resumption of student debt repayments poses a challenge for workers already struggling to save for retirement due to inflation and market volatility.
The student loan pause has ended, and interest has started accruing with the first payments due in October for millions of Americans.
Despite economists' expectations, many student loan borrowers have already resumed making payments before the October deadline, potentially leading to a decline in consumer spending and affecting the economy as households adjust their budgets.
As part of President Biden's efforts to make student loans more manageable, the administration has created a 12-month on-ramp to repayment starting in October 2023, allowing borrowers to delay payments without negative consequences, although interest will still accumulate; however, the administration's new SAVE income-driven repayment plan may be a better option for some borrowers.
U.S. consumers have accumulated $43 billion in additional credit card debt during Q2 2022, three times the average amount since the Great Recession, and credit card interest rates have soared to over 20%, raising concerns about the impact of inflation and rising interest rates on consumers' ability to pay off their balances. However, some economists argue that higher wages are helping consumers keep pace with their debt, and the overall rate of charge-offs remains low. Nonetheless, the combination of spent-down pandemic savings and the resumption of federal student loan payments could pose challenges for lower-income borrowers and hinder consumer spending.
Borrowers with federal student debt can use their remaining funds in a 529 college savings plan to pay off up to $10,000 of their debt, providing a potentially appealing option as student loan bills are set to resume in October.
The resumption of student loan payments in October could have a substantial impact on consumer spending and the economy, potentially subtracting 0.8 percentage points from consumer spending growth in the fourth quarter and putting pressure on retailers during the crucial holiday shopping season; however, the full extent of the impact remains uncertain due to factors such as income-based repayment programs, the one-year grace period for missed payments, and the potential for borrowers to prioritize other expenses over loan repayments.
Women, who hold two-thirds of the $1.7 trillion federal student loan debt in the US, face a greater struggle with loan repayment due to lower earnings and the gender pay gap, which will become more evident as borrowers resume loan repayments after a pandemic pause, exacerbating their financial burden.
Borrowers should prepare for the resumption of student loan payments by exploring repayment options, such as deferments and income-driven plans, as well as utilizing resources like the federal loan calculator and financial aid administrators.
The Biden administration has introduced a new federal student loan repayment plan called SAVE (Saving on a Valuable Education) that calculates monthly payments based on a borrower's income and family size, and offers forgiveness after 10 years of payments.
Some federal student loan borrowers may have their payment due dates extended to November or December based on factors like their last payment before the pause, and recent graduates may get more time if they're still in their grace period.
Hundreds of thousands of borrowers in the US are set to receive at least $6 billion in student loan forgiveness, but a major loan servicer is being accused of violating the terms of the agreement, adding to the ongoing issues faced by borrowers as student loan payments resume.
The looming government shutdown may disrupt the return of student loan payments on October 1, as loan servicers struggle to handle the influx of borrowers seeking assistance.
Summary: Student loan borrowers have the option to appeal for forgiveness through either the Public Service Loan Forgiveness or the Income-Driven Repayment Forgiveness federal programs.
Student-loan borrowers who were part of a 2022 settlement are still waiting for their relief to be processed, with concerns that a student-loan company is not implementing the settlement terms correctly and forcing some borrowers to resume payments in October.
Tens of millions of Americans will resume making student loan payments in October after a pandemic-related pause, with decisions to be made regarding repayment options and potential government shutdown complications.
Approximately 7 million federal student loan borrowers, many of whom have never made a payment before, will have to start repaying their loans in October, and there are several key steps they should take to navigate the process successfully, including updating their contact information and exploring repayment plan options.
The resumption of federal student loan payments in October is expected to have a significant impact on consumer spending, particularly in sectors like apparel, accessories, restaurants, and footwear, according to a survey by Jefferies, with companies like Lululemon, Foot Locker, and Urban Outfitters likely to be most affected. Retailers like Walmart, Costco, and TJX, however, are positioned to weather the downturn by offering cheaper alternatives and value retail options.
Millions of student-loan borrowers are facing the resumption of monthly payments, but there are options for those who can't afford it, though falling behind on payments could lead to severe consequences.
The resumption of student loan repayments will lead to a significant decrease in consumer spending, causing a contraction in real consumer spending growth and an increase in student loan delinquency rates, according to Fitch Ratings.
Paused student loan payments have contributed to an improvement in Americans' credit scores, but as payments are set to resume next month, borrowers may face financial challenges and a potential impact on their credit scores.
The end of the freeze on federal student loan payments in October is expected to negatively impact the U.S. housing market, with economists predicting a lasting effect on homeownership rates for at least a year and potentially longer. The resumption of payments is also anticipated to increase delinquency rates and further worsen the housing affordability crisis caused by high mortgage rates and a shortage of available homes.
Student loan repayments, which have resumed after a three-year pause, may not cause a recession in the US economy as the debt is concentrated among a small number of households, but it will likely impact consumer spending and potentially slow down economic growth.
President Joe Biden announced a new round of federal student loan forgiveness, erasing $9 billion in debt for 125,000 borrowers and totaling $127 billion since he took office.
The Biden administration has announced an additional $9 billion in student debt relief, providing fixes to income-driven repayment plans, public service loan forgiveness, and debt cancellation for borrowers with disabilities. This relief will benefit approximately 125,000 borrowers and is part of the administration's efforts to address obstacles and breakdowns in federal programs.
The resumption of federal student loan repayments after a pause due to the pandemic could have a significant impact on the US economy, with consumer spending potentially being affected as borrowers face increased financial obligations.
The resumption of student loan payments in the US raises concerns about the financial vulnerability of borrowers, although the Biden administration's SAVE plan is expected to alleviate some of the burden by offering more generous repayment options. Black borrowers, who already have larger outstanding debts on average, face additional challenges in paying down their loans due to earning disparities in the labor market. The growth of student loan debt has slowed during the payment pause, but it remains to be seen how it will change once the pause ends.
The new income-driven repayment plan for federal student loans, known as the Saving on a Valuable Education (SAVE) option, is causing confusion and frustration for borrowers, with many experiencing miscalculated payments and enrollment issues.
The resumption of federal student-loan payments is not expected to significantly impact the economy, but certain groups of borrowers may struggle to make payments or repay other loans, according to a survey by the Federal Reserve Bank of New York. Borrowers may have already adjusted their spending patterns, and new repayment plans and the use of savings may mitigate the impact. However, there is a risk of delinquency and default, with certain groups, such as women and low-income borrowers, being more vulnerable. The Biden administration's SAVE plan could help some borrowers, but successful enrollment is crucial.
Household budgets in the U.S. are expected to continue supporting high levels of spending, with homeowners benefiting from mortgage refinancing during the pandemic and people with student loans planning to reduce spending by only $56 per month on average after payments resume. However, delinquency rates on credit cards and auto loans have increased, and some borrowers anticipate missing loan payments.