“`html

Understanding the Impact of Student Loan Payments on Household Debt

Millions of student loan borrowers will soon face the resumption of monthly payments, adding to their existing household bills such as credit cards and car loans. Federal student loan payments, which have been on pause since March 13, 2020, will resume on October 1, 2023, with interest starting to accrue again in September.

The Biden administration’s plan to cancel some or all student debt was overturned by the Supreme Court on June 30. However, the president is exploring new approaches to address the issue.

The Average Monthly Student Loan Payment Is $203

According to Experian data, student loan borrowers will start making an average payment of $203 later this summer. While this amount is less than most car loan payments, it adds another financial obligation for consumers already dealing with higher costs due to inflation.

Renewed Student Loan Payments Will Add to Household Debt

Household debt is growing at its fastest pace in 20 years. Higher interest rates on debts like credit cards mean households may face continued pressure in paying their debts throughout 2023. Federal Reserve data shows that the percentage of household income devoted to debt repayment remains steady, but it varies among different borrowers. Millennials, who carry nearly half of the outstanding student loan debt, will be particularly impacted when payments resume.

Credit Scores and Student Loan Borrowers

Experian data indicates that consumers with student loan debt have slightly lower average credit scores than the general population. As of Q3 2023, the average FICO® Score for a student loan borrower was 693, compared to the national average of 714. Despite the three-year payment pause, many student loan borrowers continue to carry a financial burden, which affects their credit scores.

Alternative Solutions for Student Loan Borrowers

Despite the Supreme Court’s ruling against loan forgiveness, borrowers have other options to manage their student loan balances. Public Service Loan Forgiveness programs have accelerated, with over 500,000 borrowers receiving forgiveness. Workplace student loan benefit programs are also gaining traction, and income-driven repayment plans offer more manageable payment options based on income.

The Department of Education has introduced a new income-based repayment plan called Saving on a Valuable Education (SAVE), which aims to reduce monthly payments for low-income borrowers and cap undergraduate loan repayment at 5% of discretionary income. Additionally, a new 12-month transition period is designed to help borrowers restart loan payments and avoid delinquency or defaults.

For any mortgage-related needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to discuss your options and find the best solution for your financial situation.

“`