Americans worried about repaying their student loans have gotten another reprieve with President Joe Biden extending a pause on repayment and interest accumulation until May 1, 2022. The government paused student loan repayment shortly after the onset of the COVID-19 pandemic, when millions suddenly found themselves without jobs. Since then, the government has extended the reprieve several times.
With student loan debt totaling $1.75 trillion and the average borrower owing nearly $40,000, the extension could benefit millions and may also fuel consumer spending. Every dollar kept in a consumer’s bank account rather than sent to pay down student loans is money that can be spent on goods and services.
Besides the payment freeze, interest rates on qualifying loans have been set at 0 percent throughout the COVID-19 pandemic. Interest will begin accumulating once again come May 2022.
The Student Debt Crisis Center has found that nearly 90 percent of borrowers are not prepared to start repayment. The Center found that nearly 70 percent of borrowers were working full-time. Regardless, many people remain financially restrained, with 87 percent reporting that suspended student loan payments allowed them to pay other bills.
Student borrowing has increased dramatically as college costs have risen over the years. In 2018-19 dollars, tuition and living costs at four-year public universities cost on average $8,981 in 1985-86. By 2018-19, costs had risen to $20,598. Roughly 43 million Americans have student loan debt as of May 2021 and 5.3 million federal loan borrowers are in default.
President Biden, among others, is urging borrowers to prepare to restart repayment come May and to consider applying from income-based repayment plans.