Though student loan repayments have resumed following a temporary pause in 2020, millions of Americans across the country cannot pay off their debt, with activists calling it a “massive student debt strike,” according to CNBC.
The holdoff is the result of Americans struggling to balance bills with student loan payments, an outcome that was predicted over a year ago by economic experts when the conversation of student loan cancellation arose. Education Department Under Secretary James Kvaal spoke about the circumstances in a legal filing in Nov. 2022.
“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” he wrote.
In a 6-3 majority, the Supreme Court recently rejected President Joe Biden’s student loan forgiveness plan, which would cancel up to $20,000 per person. The Court cited the Education Secretary’s lack of authorization to do so without approval from Congress. ″Can the Secretary use his powers to abolish $430 billion in student loans, completely canceling loan balances for 20 million borrowers, as a pandemic winds down to its end?” wrote Chief Justice John Roberts in the majority opinion. “We can’t believe the answer would be yes.”
Experts have shared their concerns regarding the impact of student loan repayments on the public. Data from the U.S. Department of Education reveals that only 60% of borrowers with loans due in October managed to pay their bills
by mid-November. This data is indicative of a vast issue in the United States, which is the worsening state of the economy as Americans are grappling with federal loan repayment on top of typical responsibilities, including rent, utilities, and general survival. Paired with technical difficulties such as servicer errors, missing account information, and outright confusion, many Americans are at a loss on how to proceed.“Faced with the impossible choice of feeding their kids, keeping a roof over their head or throwing an average of $400 a month into the Department of Education incinerator, borrowers are rightly choosing to keep themselves and their families financially afloat,” said Asha Taylor, who co-founded the Debt Collective, a union for debtors.
The country’s economic landscape is expected to be drastically impacted by student loan payments, with experts sharing their projections. “The upcoming resumption of student loan repayments will put additional pressure on the already strained budgets of tens of millions of households,” Target CFO Michael Fiddelke told USA Today. However, because many borrowers are currently weighing their options and not yet paying off their existing loans, the United States economy has not fallen entirely under as expected.
“It’s posing less of a drag and one small factor helping to avoid recession,” said economist Nancy Vanden Houten of Oxford Economics. With these complications, the country is in the middle of a transitional phase, and some experts believe that it will take a few months before things return to normalcy.