As student loan payments resume this month, more than 43 million Americans carrying that debt saw the end of more than three years of relief from monthly payments. But the financial landscape in which they resume payments has shifted.
Researchers are still working to understand the impact that the pause had on borrowers’ finances, said Jonathan Glater, a professor at Berkeley Law and co-founder of the Student Loan Law Initiative.
“People who are precarious at the outset…will also be financially more precarious when the payment obligations resume,” Glater said.
“We’re worried about what the effects of this resumption of the obligation to repay will be,” he said. “Of course, it’s also the case that now there are repayment plans that are more generous so hopefully those will mitigate the resumption of the obligation to pay down this debt burden.”
In particular, the Biden administration’s SAVE plan, which launched this summer, is expected to lower payments for millions of borrowers. Borrowers enrolled in SAVE with incomes below $32,800 annually will not be required to make monthly payments. Additionally, it ensures that balances do not grow for borrowers enrolled in the plan who make their required monthly payments.
Since 2003, student debt has been the fastest-growing form of household debt, increasing more than 500% over the two decades, far more than increases in mortgage and auto debt that occurred over the same period, according to data from the New York Federal Reserve Bank.
During the pause, student loan debt growth slowed: from the second quarter in 2020 to the second quarter of 2023, the burden of mortgage and auto loan debt increased by close to 20%, while student loan debt grew by only 2% in the same period.
The slower growth doesn’t reflect more people paying off their educational debt. In the first…
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