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As student loan repayments restart, certain borrowers are not reducing their spending
Most student loan borrowers in a recent survey indicated that they are not reducing their spending habits, even after the resumption of payments in October, which marked the first time in over three years.
Less than half of the respondents in a University of Michigan poll stated that the return to repayment caused them to cut back on spending. Approximately 30% said they are now saving less money.
“The results of the survey show that a relatively small number of Americans have decreased their spending following the resumption of student loan payments,” stated the researchers in the survey, which was published last week.
The findings are based on a poll of about 550 borrowers with outstanding student loan debt who were surveyed between late September and mid-January.
In October, more than 20 million Americans had to make student loan payments for the first time since March 2020. According to the survey, only around 40% of respondents whose loan bills came due in October said they would reduce their overall spending as a result.
The findings, although not representative of all borrowers, defy the expectations of those who had been anticipating a potential decline in consumer spending as the unprecedented pause in student loan payments during the pandemic came to an end.
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The return to repayment has not been without challenges. According to the Education Department, 40% of federal student loan borrowers missed their first bill since the pandemic, and only 60% of the 22 million borrowers made their payments on time.
As the bills became due in the fall, borrowers spent hours waiting on hold with loan servicers. Many received incorrect billing statements, and several did not receive their statements on time, resulting in significant fines imposed by the federal government on some of the largest servicers in the country, including Aidvantage and the Missouri Higher Education Loan Authority (MOHELA).
On the other hand, student loan companies blamed the Biden administration for mishandling the repayment launch.
A report published earlier this month by the Consumer Financial Protection Bureau (CFPB), a federal oversight agency, highlighted the “serious implications for borrowers as well as for servicers’ compliance with state and federal consumer financial protection law.”