Consumers may not be prepared for ‘the sizeable shock’ into their wallets when student-loan payments resume in three months

After a break of more than 3 years, student loan payments will resume this autumn, but consumers aren’t happy with it.

President Joe Biden’s Education Department stated early in the month that payouts would resume in October and that interest would once again start to collect on borrowers’ accounts in September. This occurred after the pandemic-era payment freeze was repeatedly expanded by both past presidents, Donald Trump, and Joe Biden, to provide financial assistance to millions of government borrowers.

However, the White House made it quite obvious that a further extension was not planned when Biden passed an agreement to extend the debt ceiling into law at the start of June, which fixed the termination of the student loan payment halt. Recent comments from Bank of America and Morgan Stanley both noted that while most borrowers will find it difficult to resume settlements, some are at risk of doing so.

Ethan Harris, head of global economics at Bank of America, composed in a note this past week: “We believe it is appropriate to believe that major defaults will fall back to at least pre-Covid levels, given that the proportion of significantly in default student loan balances decreased little throughout 2012 and 2019.”