Student Loan Repayments – Will It Start The Recession?

Millions of young Americans will face the end of the student loan payment moratorium this summer. Why is this happening now, after a three-year break from payments? It is the result of the recent passage of the “Fiscal Responsibility Act” to raise the debt ceiling. Under that act, the Biden Administration is prohibited from extending the pause on student loan repayments which have remained in place since March 2020.

“Student loan payments are set to resume in the coming months. For more than 40 million Americans carrying student loan debt, the timeline to resume making payments is now on the horizon. The debt ceiling deal passed earlier this month paves the way for student loan payments to resume as early as August 29, 2023, per the latest update from the U.S. Department f Education: Federal Student Aid. For most, this will be the first time making payments since the early days of the pandemic in March 2020.” – Zerohedge

student loan repayment pause

“So what? Some students with tuition debt now have to pay their loans.”

While, on the surface, the restarting of payments does not sound like a “big deal,” it is. As of the end of Q1-2023, almost $1.8 Trillion in student loan debt is outstanding. That debt carries a substantially higher interest rate than current bank loan rates.

“About 92 percent of student loan debt is federal, with interest rates ranging from 4.99 percent to 7.54 percent. Average private student loan interest rates, on the other hand, can range from just under 4 percent to almost 15 percent.” – Bankrate

student loan owned and securitized