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Brace yourself: The time for putting off paying student loans has ended.
Tens of millions of borrowers are preparing to resume paying back student loans, and for some it’ll be the first time in years.
Unfortunately, it’s leaving some borrowers feeling like they are on borrowed time and worried if they will ever be debt-free.
Niuua Clark lives in New Jersey and graduated high school in 2020. She missed most of her senior year in high school due to the pandemic.
Clark then spent her first year at Penn State attending classes in person and virtually.
She had to make the difficult decision to take a break from school to work and pay back her mounting student loans.
“I had to pay $14,000 per semester, it adds up,” Clark said.
Her loans for two years now total more than $28,000 — but she says she has a 14.7% interest rate, making the debt nearly impossible to pay off.
The prospect leaves her feeling hopeless.
“Everything is piling up so fast, it’s really hard to find a job nowadays and you can’t pay these high amounts. It’s different from when our parents were growing up,” said Clark.
The freeze on student loans repayment ends in October, leaving tens of millions of borrowers like Clark to begin making repayments after a break of more than three years.
Bruce McClary is the senior vice president of the National Foundation for Credit Counseling. He says the freeze on federal held student loans began in March 2020 under the CARES Act.
“Initially it was planned only to last until September 30 of the same year but because of the protracted period of COVID, and the fact that the economy was still struggling, it was subsequently extended several times,” said McClary.
Student debt relief advocates gather outside the Supreme Court on Capitol Hill in Washington, Monday, Feb. 27, 2023, ahead of arguments over President Joe Biden’s student debt relief plan. (AP Photo/Patrick Semansky)
President Joe Biden campaigned to reduce and in some cases eliminate student debt, but his student loan forgiveness plan was challenged by GOP lawmakers, ultimately falling to a 6-3 Supreme Court ruling. Borrowers are not required to pay loans while in school, and are granted a six-month grace period after graduation. The pause on student loan repayment lasted much longer.
“It provided relief to a lot of borrowers by suspending loan payments and setting interest rates to 0%. As you can imagine it helped alleviate a lot of the financial burdens people are facing during that time,” said McClary.
Now that’s over. Loans began accruing interest again on Sept. 1.