Paige Cerulli Last Updated On: April 16, 2024

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Returning Student Loan Payments Mean Stress for Borrowers

During the pandemic, federal student loan payments and interest were paused for years. With loan payments starting up again in October, and Congress having voted down President Biden’s bid at loan forgiveness, borrowers face the reality of having to resume making payments on their loans.

Resuming loan payments could impact borrowers in several ways. Some borrowers have never had to make loan payments before, and they are poised to experience a major change in their budgets. And for many, student loan payments are a major source of stress.

The Economic Impacts of Student Loan Debt

Student loan debt has a major impact on borrowers’ spending and saving habits. According to data from the Education Data Initiative, federal student loan debt averages a total of $37,338 per borrower, and the average private student loan debt is $54,921 per borrower. The median monthly payment for those with student loans is $250, and half of student borrowers still owe $20,000 on their loans 20 years after they started school.

Making monthly loan payments eats into borrower incomes and spending power. According to the Federal Reserve’s 2019 report, student loan debt correlated with a nine percent drop in homeownership levels in young adults from 2005 to 2014. Fidelity Investment’s report found that borrowers with student loan debt contribute an average of six percent less to retirement savings compared to people without student loans.

The Mental Health Impacts of Student Loan Debt

Student loan debt also has significant impacts on borrowers’ mental health. A study by the University of Georgia analyzed more than 85,000 posts about student loans on Reddit and Twitter. The posts were from 2009 through 2020, and the study didn’t include posts by political figures or policymakers. The study examined “users’ naturalistic expressions on student loans,” and found high levels of negative thoughts and emotions like sadness, fear, and anger surrounding student debt.

A study published in Addictive Behaviors in April 2023 identified a correlation between student loan debt and problematic drinking and mental health symptoms. The study found that student loan debt was also linked to stress in college graduates.

Those mental health impacts can be grave. In March 2021, Student Loan Planner conducted a mental health survey of more than 2,300 high-debt student loan borrowers. The survey revealed that 1 in 14 respondents had experienced suicidal ideation at some point of their loan repayment journey. That marks an increase in suicidal ideation compared to the 2019 mental health survey, in which 1 in 15 respondents reported suicidal ideation.

According to the 2021 survey, respondents who owed more than two times what they earned were 2.5 times more likely to experience suicidal ideation than borrowers who owed less than what they earned. Suicidal ideation also increased to 1 in 6 respondents for the demographic of single women earning less than $50,000.

How to Prepare for Student Loan Repayment

With student loan repayment resuming in October, it’s time for borrowers to prepare to make those initial payments. These steps can help you to make sure you’re ready to make that first payment.

  • Determine your loan servicer. Student loans may have been sold since you last made a payment, and you might not remember who your loan servicer(s) is. You can get that information by logging into your Federal Student Aid account, or by calling 1-800-4-FED-AID.
  • Update your contact information. Once you’ve identified your loan servicer, make sure to update your contact information so you can receive communication about your loans.
  • Review your payment information and check your loan balances and your monthly payment information. Make sure that you can afford your monthly loan payments.
  • Explore repayment plan options. The Federal Student Aid Loan Simulator can help you to explore your repayment plan options, such as income-driven repayment plans, which can make your monthly payments more manageable. If you feel that one of the plans would be helpful, apply for that plan now.
  • Contact your loan servicer. If none of the repayment plans offer you the help that you need to be able to afford your loans, you can contact your loan servicer to request to temporarily pause or lower your payments through deferment or forbearance. Keep in mind that interest can still add up during this period.

It’s essential to avoid missing a loan payment, at which point your loan will become delinquent. If your loan remains delinquent for 90 days or more, your servicer will report that delinquency to national credit bureaus, which can impact your credit score. If your loan is delinquent for 270 days, it will go into default. At that point, your credit score will be damaged and the government has the ability to take your tax refund, part of your Social Security benefits, or up to 15% of your paycheck to help pay off that loan.

The start of student loan repayment in October is stressful for many borrowers, but by preparing yourself for those payments, you’ll be better in control. Understanding just what you owe, how much your loan payments will be, and what repayment options are available to you can help you find an arrangement that helps you to best manage your loan payments.

Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.

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