The government’s pandemic-era pause on student-debt payments allowed millions of Americans to forget about a big monthly bill for more than three years. Now some Americans face a serious reckoning—and so do the places where they spend their money, the Wall Street Journal reported. Around 43 million people in the U.S., some 17% of the adult population, have federal student debt. Out of those borrowers, roughly 26.6 million—or about 10% of the adult population—had loans in forbearance as of the first quarter, according to the National Student Loan Data System. This was thanks to the federal government’s suspension of payments and interest accrual starting in March 2020. That pause is ending Aug. 30, as part of the bipartisan debt-ceiling deal signed in early June. While the Biden administration’s student-loan forgiveness program would have shaved off a big portion of that debt, it has a slim chance of surviving a Supreme Court challenge. The administration is said to be weighing a grace period during which borrowers who miss payments won’t be referred to delinquency, as the Wall Street Journal reported. That would delay the eventual impact of the resumption of student-loan payments by about three months to a year. The hit to household cash flows as a result of the resumption could be substantial: Bank of America Institute estimates it might be around $180 a month for the median impacted household. In a 2017 survey conducted by the Federal Reserve, the median monthly student-loan payment was $222 and the average was $393. Estimates vary, but even on conservative expectations, borrowers are set to collectively resume paying $5 billion to $8 billion a month once the pause is lifted.
