How Severely Will Student Loan Repayments Impact New York Borrowers?
Student loan repayments resume in October and that has economists worried about how that will damage the economy.
After a 3-year moratorium on student loan repayments and accruing interest, 43.8 million Americans will start making payments on October 1.
That group owes a collective $1.64 trillion in debt, making it the second-highest debt category behind mortgages. If that amount was divided equally among all student loan borrowers, each would owe roughly $30,000.
Moody's Analytics issued a not-so-great forecast for the nation's economy when people being redirecting money towards these loans. The estimate is that repayments will funnel roughly $73 billion out of the economy.
Already, student loan borrowers are poring through their budgets and trying to make cuts wherever they can.
That also means any extra money that would go towards purchasing things like entertainment, goods, services, and more will go to public and private loan providers.
So how badly will New Yorkers be impacted when repayments resume at the end of the month?
A look at New York borrowers
Personal finance website WalletHub looked into how each state is about to be impacted by repayments.
The study looked into 12 key metrics that included average student loan for borrower, share of student loan borrowers per capita and the number eligible for forgiveness.
For New York, it appears the state will be moderately impacted when repayments resume October 1.
The state placed 25th overall in terms of financial impact. The state ranked 38th overall in terms of student loan indebtedness and 13th in share of student loan borrowers eligible for forgiveness.
The state was on the high end for average student loan debt for borrower, with a 10th place finish.
On the flipside, the state ranked 32nd overall in terms of average student debt as share of income and also finished in 39th place when measuring the share of residents saddled with student loan debt.
Click through the interactive map to see how the other 50 states fared in this latest roundup:
While these findings are based on data, we'll know more about the exact impact repayments will have when they resume in a little over a week.
What Economists Are Saying
Economists are not too jazzed about repayments starting since the economy is still crippled by the lingering issues that arose during the pandemic.
The supply chain issues is still causing shortages in some areas, while inflation is forcing Americans to pay even more for basic necessities. Market watchers are also sounding the alarm that student loans could be the proverbial straw that breaks the camel's back and cause America to tumble into a recession.
Some are saying this could have been averted had the Supreme Court upheld President Joe Biden's plan to forgive up to $20,000 per borrower.
Those from Moody's and Goldman Sachs say America would be bracing for a much softer landing had that forgiveness been upheld.
As for how our political leaders plan to tackle the mounting student debt crisis, President Biden has introduced the SAVE, or Saving on a Valuable Education, plan. It's intended to lower monthly loan payments and reduce the amount of money borrowers pay over their lifetime.
The website is now live and borrowers can check out their options.
Republicans have also put forth their own proposals to combat the issue. Republican lawmakers introduced the Federal Assistance to Initiate Repayment (FAIR) Act over the summer.
Conservatives agree the student loan crisis is getting out of hand and say the government is treating borrowers "as an unlimited piggy bank."
Melanie Carter, Associate Provost and multi-hyphenate from Howard University, told WalletHub that politicians should focus on slashing the high interest rates these student loans have.
For example, my student loan rates are set at 7 and 8 percent. I took out $120,000 in loans between 2010 and 2012. Even though I have never missed a payment, I now owe a grand total of $137,000.
If it helps, I managed to get my principal down to $90,000.
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Carter said "eliminating or greatly reducing the accrued interest on student loans" would make repayments more possible and realistic.
Whether or not that will ever happen has yet to be seen. But to the nation's 43.8 million student loan borrowers, they're already begging for relief. Is the answer eliminating interest?