As federal student loan payments commence again in October, borrowers are expressing the dread and stress they’re feeling ahead.
A new survey by loan lender Achieve finds that 45% of 1,000 student loan borrowers are extremely or very stressed about resuming payments, and 29% are more burdened by their student loans now than they were when the forbearance began.
“Student loan forbearances brought relief for millions during the uncertain times of the COVID-19 pandemic,” said Andrew Housser, co-founder and co-CEO of Achieve, in a statement. “But after more than three years, many consumers are now bracing for significant adjustments to their household budgets. Many will even have to delay major life plans and milestones in order to manage their student loans, existing debts and other day- to-day expenses.”
According to the findings, 28% of student loan borrowers say the resumption of federal student loan payments will likely require them to take on new debt to manage their personal finances, while 24% anticipate needing financial assistance or hardship provisions to resume their payments.
Allocating funds to life milestones
Over half of respondents halted their payments during the COVID-19 pandemic, as 56% completely stopped paying back their student loans during the 41-month-long forbearance, reported Achieve. Thirty percent say they made at least some payments and 14% continued to make all their payments.
Instead of repaying their student loans, respondents say those payments went towards basic living expenses (36%), education and professional development (16%), and building up emergency savings (10%). Nine percent of borrowers used the money for leisure or non-essential items, and 8% used the funds to pay for a vacation. Almost half (45%) paid down other debts, including mortgage/rent expenses (27%), credit cards (26%), and past-due bills (24%).
Now, the commencement of student loan payments is causing nearly two-thirds (65%) of borrowers to delay other major life milestones, as Achieve finds that 62% expect their monthly payments to come in at less than $250 a month, while 13% anticipate paying $500 or more. As a result, 61% believe the end of the forbearance program will have a negative effect on their personal finances.
Close to one-third of respondents will delay saving for retirement (30%), buying a home (23%), and paying down other debts (26%). Others have foregone or delayed allocating towards an emergency savings fund (36%), buying or leasing a vehicle (17%), getting married (7%), or having children (9%).
Adding to their worries is the fact that 65% of student loan borrowers acquired new debt during the student loan forbearance period, including credit card bills (41%), car loans (17%), personal loans (16%), and medical bills (15%), reported Achieve. Among those who took on new debt, 32% say these new obligations exceeded $10,000, compared to 26% who say their new debt was less than $2,500.
SEE ALSO:
- Biden Formally Unveils SAVE Plan to Combat Student Loan Debt
- Biden Administration Cancels $39 Billion in Federal Student Loan Debt
- 10 States with Highest and Lowest Student Loan Debt
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.