Student loan borrowers paid down billions of dollars in debt as they prepared for the end of a federal freeze on payments and interest.
The US Department of Education saw a surge in payments last month as borrowers with savings started wiping out their balances, according to a new report by Goldman Sachs. After a three-year pause, interest began accruing again on federal student loans Friday, and borrowers need to start making payments in October.
For years, borrowers held out hope that forgiveness plans from President Joe Biden would help alleviate their debt burden. But after the Supreme Court struck down the president’s program to eliminate up to $20,000 per borrower, many decided they aren’t willing to wait around while racking up more interest. About $6.4 billion was transferred from the Department of Education to the US Treasury in August, the most in any month since February 2020, according to government data.
Many borrowers are expected to struggle making student loan payments, with the average bill estimated at $400 a month. Others likely won’t start repaying right away. Still, Goldman’s report noted that the end of the moratorium is expected to cut consumer spending in the fourth quarter.
This article was provided by Bloomberg News.