TAMPA, Fla. — The payment pause on student loans is coming to an end. Experts are taking a look at the big picture of how payments restarting could impact the economy and what borrowers should keep in mind.
The student loan pause is something many people, including Max Fusco, were able to take advantage of.
"I graduated in '22, and I just haven't made a single payment since then because I figured if I don't have to, I don't want to,” said Fusco.
But October 2023, when first payments are due, is around the corner. Fusco made his payment a little early.
"I had the money, so I was just like I'll just pay right now and then do the next payment after that,” said Fusco.
The Department of Education is pointing people to the SAVE plan, which it says provides the lowest monthly payments of any income-driven repayment plan available to almost all student borrowers.
Earlier this month, the DOE said that more than four million student loan borrowers are enrolled in SAVE.
"The good news is in many ways, most Americans, whether they have student loans or not, did a really good job at the beginning of the pandemic of being thrifty in ways that they never had before and maybe never will be again,” said Victor Claar, an Associate Professor of Economics at Florida Gulf Coast University.
Claar explained if you look at the segment of the population that has the fastest growing credit card debt, it’s the youngest Americans, saying it’s troubling that the people who are the most likely to be facing new student loan payments have been running up credit card bills over the last year or so.
When it comes to how long it could take to see any potential impacts to the overall economy after payments restart, Claar thinks we probably won't see a significant change.
"People still need to buy groceries, they need to buy gas, they need to get to work, they still have jobs, and they'll still spend a lot of money on the things that they were already spending money on,” said Claar. “They'll just have to be a little tighter in terms of little treats and luxury goods."
Claar said loan consolidation may not save you a lot of money, but it can make paying your loans more convenient. Then, there’s also refinancing.
"The problem is at current interest rates, refinancing a loan, whether it's your mortgage or your student loans, may not make financial sense for you because it may be really difficult to find an interest rate that's better than the one you have on your existing outstanding loans,” said Claar.
