For millions of students who graduated during the pandemic, the return of loan payments this fall will be a harsh new reality. 

Monthly bills will come due this October, ending a three-year pause that gave borrowers a respite from obligations. It will be the first time that those who finished school during the forbearance period will have to pay. Members of Gen Z and other recent graduates are just getting their footing in the workforce, and are likely to have much lower salaries than older borrowers. 

Many of the most-recent classes of graduates were able to save up money, move out of their parents’ homes and pay down other debt during the pandemic pause. Now, they’re reassessing their finances as some face bills of more than $500 per month, especially after the Supreme Court last month struck down President Joe Biden’s one-time forgiveness plan. 

Analysts predict that the return of such bills will reduce consumer spending and result in increased delinquencies on credit card and auto loans. 

“I haven’t had an easy financial time since Covid even without student loans,” said Noah Diveley, who lives in Columbia, South Carolina. 

The 25-year-old graduated from the University of South Carolina in 2020 with a degree in sports and entertainment management and about $20,000 in federal student loans. He struggled to find work, with his industry rocked by the lockdowns, so ended up taking a late-night delivery job.

Diveley only recently got a full-time position coordinating volunteers at an animal shelter, which pays about $2,400 a month. He’s worried about how an additional $250-a-month payment will affect his budget, especially since he currently has a $500 monthly car payment.    

New Struggles
So far, about 11 million people have completed undergraduate degrees since the pandemic began (figures for the 2022-23 year aren’t available yet), and more than 50% of them left college with student debt. That’s a difficult burden to manage on a starting salary, especially with still-elevated inflation and the chance of a recession hanging over the economy. The average starting salary was $55,911 for a member of the class of 2021, the most recent year for which data is available, according to the National Association of Colleges and Employers. 

Rahul Ravindran, who lives in Park Ridge, Illinois, said the return of student-loan payments is going to make it harder for him to achieve goals like buying a home and getting married. 

The 26-year-old physical therapist has about $145,000 in loans from both his undergraduate and graduate degrees. He’s applied for an income-driven repayment program that would cut his bill to about $200. But if that doesn’t work, he’ll likely have to pay about $500 a month. 

“It’s going to affect a lot,” he said. “It’s going to postpone all my plans. If I have car problems, I won’t be able to afford a new car.”

About 36% of older Gen Zers, aged 20 to 25, have student loan debt, according to the Federal Reserve Bank of St. Louis. That compares to just 31% of the equivalent cohort of millennials—now 36- to 41-years-old—when they were the same age. The average student loan balance for the Gen Z group is also 13% higher, at $20,900.

Relief Attempts
After the Supreme Court ruled that Biden couldn’t forgive up to $20,000 in federal loans per person, his administration announced a plan to help borrowers ease back into payments. Under the program, which runs through September 2024, those who miss monthly payments will not be considered delinquent, reported to credit bureaus or referred to debt collection agencies.

The executive branch is also pursuing a forgiveness plan under a different legal rationale—the Higher Education Act of 1965—which gives the education secretary authority to manage the federal student-loan portfolio. But that could take months or even years and will likely face legal challenges. 

Sabrina Calazans in New York was hoping Biden’s plan would alleviate the student-loan burden her family faces. The managing director at the Student Debt Crisis Center, a debtor advocacy group, graduated with about $30,000 in federal student loans and $8,000 in private ones, while her dad has about $11,000 in Parent PLUS loans. Her sister, who graduated this year, will also soon be paying back $22,000 in federal loans. Biden’s forgiveness program would have wiped out a total of $50,000 of her family’s debt. 

For Calazans, the payment restart will be the first time she’s facing monthly bills for her federal loans. Although she graduated in 2019 from Arcadia University in Pennsylvania, she put her loans in forbearance because she couldn’t afford the $300 bill—then the pandemic started, and she never had to make a payment on her federal loans, although she has been chipping away at her private debt. 

She’ll soon face those $300 payments again, which will make her budget much tighter. She’s preparing now by saving up as much of her paycheck as she can while still contributing to rent, food and other family expenses. She also plans to help with her dad’s Parent PLUS loan payment.

“Things have been definitely tougher,” she said. “It’s hard to save when you’re already struggling and your family was paycheck to paycheck.”

This article was provided by Bloomberg News.