When Students Must Pay The Piper
It’s June 2023. While most Americans have long since thrown away their COVID masks and returned to sporting events, music venues, restaurants, and planes, the federal government is just now officially ending its pandemic emergency measures. One big change is that students have to start repaying their student loans again (or start paying them for the first time). Whether President Biden’s plan to erase roughly $400 billion in loans through executive order goes through or not, millions of borrowers will remain who must begin sending their loan payments to the government at the end of August. This is money that the borrowers could (and did) use on other things during the pandemic, such as paying down debt, saving, or raising their standard of living. Starting around Labor Day, that will change, and we’re not ready.
To get a handle on this, I reached out to Mark Kantrowitz, a student loan expert. He estimates that of 43 million student loan borrowers, up to 27 million might qualify for some level of loan forgiveness. This would erase the debt for 16 million and leave 27 million who must repay either part or all of their debt. By his calculation, these remaining borrowers will owe on average $393 per month and a median of $222 per month. When repayment begins, around $5.5 billion that borrowers currently use for other things instead will be sent to Uncle Sam. If the Supreme Court shoots down the Biden executive order plan, then the monthly repayment will rise to more than $8 billion per month.
Americans spend about $700 billion per month in retail sales, so this won’t break the economy, but the effects won’t be spread evenly. Young consumers with student loan debt payments that eat a larger share of their budgets (vs. the budgets of older consumers) will feel more pain. Businesses that cater to a younger, educated clientele likely will feel the bite. While tens of millions of borrowers might be dreading the restart of their student loan payments, millions of borrowers likely will be blindsided when the bills come due. These are the students who graduated after May 2020, when the federal government first declared the pandemic emergency, and have never made a payment on their debt. The U.S. Department of Education is trying to reach all borrowers so that they know what to expect, but with at least 26 million clients to contact, multitudes likely will fall through the cracks.
All the conversation about repayment leaves one element undiscussed, why does college cost so much in the first place? For decades we were told that attending class on campus was the only “real” way to experience college and get the most out of it, but that argument went out the window with the pandemic as universities didn’t allow in-person learning and yet demanded the same tuition and fees.
If we’re empathetic towards college graduates who carry student loan burdens, we should look past the loans and ask about the providers. How is it that the corporate world can save money through productivity gains long before the pandemic, and then supercharge that productivity through remote work, and yet college costs always march higher? Until we demand answers to the root problem, we’ll be stuck struggling to address the symptom.
For information on college students and how college enrollment is changing as our economy changes, watch this video by Rodney Johnson.
Written by Rodney Johnson The Rodney Johnson Report
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