The Consumer Financial Protection Bureau has published an update on the impact that the end of the payment moratorium is going to have on individuals with student loans, adding more fuel to the fire that a large number of borrowers will struggle and quickly find themselves in financial trouble once the freeze ends.
The CFPB estimates that as many as 20% of student loan borrowers have risk factors that suggest they will struggle to make payments once the moratorium ends, which is likely to occur by the end of the summer. The moratorium is in effect until either 60 days after the Supreme Court issues its ruling on whether the Biden Administration can move forward with its plan to forgive up to $20,000 in unpaid student loans for every borrower, or June 30, whichever comes first. The Education Department has said that it likely will take until October for the payment machine to be fully up and running.
Individuals with student loans are already struggling to pay their other bills, the CFPB noted, and when they have to start making payments on their student loans again, that may be the straw that breaks the consumers’ backs. About 8% of consumers with student loans are currently delinquent on other bills, which is higher than it was before the moratorium was put in place at the onset of the COVID-19 pandemic in March 2020.
Individuals between the ages of 18 and 29 have debt payments — excluding mortgages and student loans — that are $65 per month higher than they were in 2020, according to the CFPB. Total debt payments every month are now north of $200, the CFPB noted.
