ABC News Photo Illustration
When Congress voted in May to restart student loan payments this fall — and then the Supreme Court overturned President Biden’s student loan forgiveness plan in June — Alexa Goins and her husband realized they had a choice: They could keep their house or they could pay off their student debt.
Together, she and her husband owe $41,000 in student loans — she had borrowed for her undergraduate education, and he borrowed for another program. He is currently between jobs, looking to break into the tech industry, so they’re living off Goins’s $80,000 per year salary as a senior writer at an ad agency. “We’re kind of living paycheck to paycheck right now,” said Goins, now 29.
Her husband bought the Indianapolis house they live in before their marriage, and they were thinking of leaving the city in a year or two anyway. But it was the impending resumption of payments and the demise of Biden’s program — which would have canceled up to $20,000 in debt for an estimated 16 million borrowers, including Goins — that made up their minds. “Just knowing that we’re going to have an extra burden … we just decided, now’s the time to sell so that we can finally have no debt,” she said. Renting, debt-free, feels like a safer bet right now.
In October, student loan borrowers like Goins and her husband will be on the hook for payments for the first time since 2020. When the pandemic hit, the Department of Education automatically paused student loan payments for all borrowers and suspended interest. The policy got extended, and then extended again, so that for three years, borrowers were allowed to skip payments and avoid defaults, without seeing their balances grow. The pause had a major impact: Student loan debt is the second-biggest consumer debt category after mortgages, with the total amount of debt now approaching $1.8 trillion. Not having to make payments kept borrowers — and the overall economy — afloat in what could have otherwise been a dramatic recession during the COVID-19 pandemic, allowing them to avoid catastrophe if the pandemic put them out of work or spend their money in other ways.
Now that respite is about to end. And it’s coming at a precarious time for the American economy. It’s not all bad news: Forecasters have just started to brighten their gloomy predictions about an impending recession and some borrowers used the pandemic to pay down debt, leaving them in a stronger financial position. The Biden administration has introduced a new program that will discharge the loans of more than 800,000 borrowers who were on income-driven repayment plans and reduce the monthly payments of many who still owe. But tens of millions of people will have another bill to pay, and they’re not all coming out of the pandemic better off. The average student debt payment is significant — hundreds of dollars per month,