The moratorium on student loan payments is coming to an end, and there are probably plenty of people in the accounts receivable management industry who are happy about that — most notably companies that specialize in collecting on unpaid student loans. But have you stopped to think about what the end of the moratorium is going to mean, really? People are going to have to start making payments on their student loans, and that money is going to have to come from somewhere. Remember the onset of the COVID-19 pandemic and how companies were collecting more than they ever had before? One reason for that is because people had fewer regular bills to pay. Now that the pause is over, consumers with unpaid student loan debt are going to lose more of their discretionary incomes.
In fact, one report estimates that individuals with unpaid student loans will lose between 4% and 11% of their disposable income to student loan payments, which is money they will not have to pay other debts. Another report reveals that a majority of individuals with student loans are already predicting they will miss payments and go into default once they are required to start repaying their loans.
The amount of disposable income that is going toward student loans increases by generation, according to the report. Members of Generation Z will require using 4.3% of their disposable income to repay their student loans, compared with 6.5% for Millennials, 8.8% for Generation X, and 11.3% for Baby Boomers.
People are starting to worry about the impact that restarting student loan payments will have on the economy. Retailer Target, for example, had its financial outlook downgraded by analysts because of how much it is exposed to student loan repayment concerns.
The CEO of SoFi recently was interviewed and encouraged individuals with unpaid student loans to refinance.