When federal student loan payments resume this fall, they are expected to pull as much as $71 billion in otherwise disposable income out of the economy every year, $5.3 billion of which will come from Arizona.
The economic pain could be very real for the 43 million borrowers – about 880,000 in Arizona – who will have to start paying back their student loans after a pause of more than three years that began as a pandemic relief measure.
According to the non-profit Student Debt Crisis Center, the number of borrowers who couldn’t afford rent has gone up 17% since 2020. They also experienced a higher rate of food insecurity.
When payments resume come October, the group warns that “millions of families are at risk of going hungry, being homeless and harming their health.”
Experts are also looking into whether the economy will take a hit.
“It’s a drag, but it’s a very modest one at that and it’s really not enough to derail the economy,” said Moody’s economist Bernard Yaros, noting that the payments are projected to reduce personal consumption expenditures by 0.2% next year.
ASU Economics Professor Dennis Hoffman said certain sectors could be impacted more than others.
“Say the housing sector, the automobile sector because those people that will be affected by it will be less likely to buy a home or a new automobile,” said Hoffman.
The return of repayments also has major retailers like Target and Macy’s bracing for profits to be cut heading into the holiday season.
But there is potential for some relief.
The Biden Administration announced the SAVE program, which will eliminate debt or lower monthly payments depending on family size and income.
You have to be enrolled in an income-driven repayment plan to qualify. To sign up, go to the federal student aid website.
