When COVID emergency funds end, student loan payments begin
ELMIRA, NY (WETM) – Before long, some 40 million Americans will have to start paying down their debt. Initially, when the COVID epidemic began, the government suspended payments to banks and lenders due to the collapsing economy and labor market.
As the pandemic continued, people experienced more difficulties with their finances, which made it more difficult to pay off their student loans. The Biden administration launched the COVID emergency relief program in January 2021 to stop payments and help struggling low-income citizens.
The economy is now returning to a normal appearance with the reopening of businesses. As a result, banks, lenders and lending services are now looking to restart collection of debts that have been deferred due to the pandemic.
“The banks and the federal government have to be flexible and try to help people the best they can if they can’t – you know, if they can prove they don’t have an income. , if they are unemployed, ”said Matthew Burr, professor at Elmira College. “We have to potentially be flexible and try to find opportunities to work with people. And don’t handcuff them with, you know, a 7% or 8% interest rate and, you know, kill their credit.
As of September 31, the COVID emergency relief program will no longer be in effect. The Federal Student Aid and Loan Service will contact people directly about resuming payments. According to EducationData.Org, about 42.9 million Americans with federal student loan debt each owe an average of $ 36,406 for their federal loans.
“It’s no use, in my opinion, for anyone,” Burr said of the ability of financial institutions to punish borrowers who are still in trouble. “It’s just going to hurt the economy in the long run.”