After the pause granted on the repayments of certain student loans in the United States, nearly 40 million Americans will have to start repaying these loans again, from May, with the risk of seeing an increase in defaults.
The student loan has always been a headache for students and their parents in the United States. The pandemic-induced economic crisis has added fuel to the fire. Today, nearly 40 million Americans will have to resume the repayment of their student loans, after a two-year break, at the risk of seeing an increase in defaults, according to a study by the FED.
These borrowers, “are likely to experience a significant increase in defaults, both for student loans and for other debts, once the moratorium expires”, underline, in this study published on Tuesday, Jacob Goss, Daniel Mangrum and Joelle Scally , economists at the New York branch of the American central bank (Federal Reserve, FED). As a reminder, a pause on the repayments of certain student loans had been decreed in March 2020 by former President Donald Trump then extended several times by Joe Biden, now until May 1, 2022, recalls AFP before adding that about two thirds of borrowers were able to benefit from this moratorium.
But, continues the same source, for the remaining third who had to continue to repay student loan maturities, defaults on other loans have multiplied. Thus, the authors of the study note a default rate on other loans which is 33% higher among this category of borrowers compared to those who do not have a student loan. These analysts fear that with the scheduled resumption of payments for all borrowers, these difficulties will worsen. “Political leaders have considered several proposals to soften the end of the moratorium,” they point out.
Some even want a pure and simple cancellation of part of the student debt, and 85 elected Democrats had sent a letter to this effect to Joe Biden at the end of January. According to a report from the FED, dating from June 2021, the total amount of student loans in the United States now reaches 1,700 billion dollars, thus constituting the second item of household debt behind real estate, concludes the same source. .
Agencies / ECO Inspirations