As the pause on federal student loans resumes in the fall, new data shows recent college graduates are not sure how they will be paying back their debts.
The latest study by Fidelity, which fielded responses from 2,004 students and new college graduates, finds two in three recent grads who have paused their student loans said they have no idea how they will begin repaying their student loans once the emergency pause is lifted.
Additionally, two-thirds (67%) of recent college graduates with student loans say their debt is preventing them from participating in major life milestones like saving for retirement, getting married, and buying a home.
High school students are also questioning how they will one day pay back their loans. According to Fidelity, while 63% of high school students in the study feel better prepared to pay for college than their parents at their age, over half do not know how much of their education they will have to repay themselves.
Also, six-in-10 high school students say they won’t be able to afford college without the help of student loans, but 36% of them do not know how long it will take to pay them back.
Fidelity notes how speaking with students on college financing prior to applying and enrolling can kickstart healthy financial habits early. The findings show that 86% of parents who talked to their child about college financing began saving, compared to 63% for those who have not.
Student loan repayments to resume this fall
Federal student loan payments are set to begin in October, marking the end of a 42-month emergency pause that saw the introduction, and end, of a proposed $430 billion federal student loan debt repayment program by the Biden Administration.
The likelihood of another delay is off the table, too. New legislation to raise the debt ceiling back in June had also included a provision that mandated the resumption of federal student loan payments in October and removed the possibility of President Joe Biden adding another extension.
Still, the Biden Administration has avowed that federal student loan debt relief will come to borrowers. After the Supreme Court’s decision to strike down his proposed program, Biden said he would be looking towards steps to provide relief to borrowers, including a temporary 12-month “on ramp” program from October 1, 2023, to September 30, 2024, that would remove the risk of default or potential impact to credit.
Last month, the Biden Administration forgave $39 billion in federal student loan debt for 804,000 borrowers after the Department of Education (DOE) notes that former plans had “historical inaccuracies” that prevented them for qualifying for student debt relief.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.