1 in 5 Student Loan Borrowers Face Monthly Payments of Over $500
"Payment shock" will be exacerbated by car loans, mortgages and other new debts taken on by many borrowers during the three-year pause, according to new findings by credit agency TransUnion.
A fifth of student loan borrowers will start making monthly payments of at least $500 this fall.
When student loan payments resume in October, half of all borrowers will have to start making payments of at least $200, according to a new study from credit bureau TransUnion. One in five are looking at a monthly bill of $500 or more.
Slightly more than 40 million Americans are carrying education debt, according to TransUnion, totaling $1.6 trillion. Two-thirds of borrowers with federal student loans -- about 27 million people -- will be cutting checks for the first time since payments were paused in March 2020.
Some will be making their very first payments, since their loans came due during the COVID-19 forbearance period.
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Borrowers "should begin assessing their monthly budgets, making any needed adjustments as soon as possible to help mitigate the impact of these payments," Margaret Poe, TransUnion's head of consumer credit education, said in a statement.
That's especially true given how many took on additional debt over the last three years: According to TransUnion, 36% of student loan borrowers added auto loans, 15% have taken on a mortgage and 15% have assumed unsecured personal loans.
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"These additional credit products mean additional monthly payments, the accumulation of which may pose added challenges for households attempting to reintegrate student loan payments into their monthly budget," Liz Page, head of TransUnion's consumer lending business, said in a statement.
The average borrower currently has about $35,000 in student loans, TransUnion reported.
The company said its data, taken from May 2023, didn't incorporate the July 14 announcement by the Department of Education that adjustments to income-driven repayment plans will result in 804,000 borrowers having their loans automatically forgiven.
For those who won't benefit from the adjustment, the Biden administration announced a yearlong "on-ramp" transition period, in which borrowers who miss monthly payments won't be considered delinquent, placed in default, reported to credit agencies like TransUnion or referred to debt collection agencies.
Interest will accrue during the period, though, which will run from Oct. 1, 2023, to Sept. 30, 2024.
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