A recent Credit Karma poll found that one in four borrowers would put off getting married or buying a home in order to pay off their college loans. 37% of respondents claimed they had no money saved up before student loan payments resumed.
More than half of federal student loan borrowers say they’ll have to choose between making a loan payments or paying for necessities like rent or groceries, according to a Credit Karma survey, (Source: GettyImage, CNet)
Student Loan Payments Will Resume Soon; Are you Financialy Ready?
Federal student loan payments resume in October 2020 after having been suspended since March 2020. According to a recent Credit Karma poll, 45% of borrowers said they plan to fall behind on their loan payments once the forbearance expires. According to Courtney Alev, a consumer financial specialist at Credit Karma, some borrowers found it challenging to continue making other payments and covering costs during forbearance. Alev stated that many borrowers were able to get ahead in other areas of their finances during forbearance, others struggled to stay on top of other bills and expenses. Alev claimed that rising interest rates and inflation frequently wiped out any chance people had of bettering their financial status.
The survey found that 53% of borrowers were already having trouble making ends meet before accounting for a cost they hadn’t had to think about in three and a half years. Many are not ready for the student loan payment resumption. More than half (56%) of respondents stated they would have to choose between paying their student loans and buying groceries or paying the rent. The Harris Poll surveyed 2,059 US people between July 25 and July 27; 394 of them had unpaid federal student loans.
It should come as no surprise that individuals with less stable financial circumstances are more vulnerable: 53% of borrowers with a household income of less than $50,000 expect to fall overdue defined as missing at least one payment compared to 36% of those earning $100,000.
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Postponement of Living Priorities for Student Loan Payments Will Resume Soon
However, the repercussions won’t necessarily be as severe as they may be because the Biden administration declared a year-long transition period during which time loan servicers won’t consider late payments from borrowers to be delinquent as student loan payment resumes. Between October 1, 2023, and September 30, 2024, interest will continue to accumulate on these accounts, but they won’t be marked as delinquent, reported to credit bureaus, or sent to debt collection agencies
A quarter of respondents say they intend to postpone financial milestones like having children or purchasing a home, and nearly the same percentage (23%) say they plan to reduce retirement savings contributions. However, many respondents say they plan to cut back on non-essential spending, take on extra work, or even dip into their savings to pay down their student loans. 34% of survey participants stated they intended to apply for an income-driven repayment plan, which has the potential to considerably reduce monthly payments. Only 30% of borrowers are aware of when their payments will resume, according to News & World Report.
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