Student-loan borrowers face a hot mess as the US braces for payments to restart

On your mark, get set… loans. After a three-year pause, student-loan repayments are restarting for 28M Americans. That’s 5X more than the number of borrowers who typically enter repayment in an entire year (picture: new grads). While we knew this was coming, borrowers are facing extra stress as student-loan systems buckle under the influx. Frustrated borrowers are dealing with incorrect bills, glitchy websites, and long hold times. Adding to woes:

• Overwhelmed: Because loan servicers like Navient quit the federal student-loan biz during the pandemic, 40% of borrowers have a different servicer than when they last made a payment. Other servicers have a bigger workload with a smaller staff — like Nelnet, which has eliminated 500+ jobs this year.

• Confused: Some borrowers who signed up for the Biden admin’s new Save plan (designed to cut monthly payments in half) are actually seeing their payments increase from prepandemic. That’s because the income-driven benefit doesn’t go into effect until next July.

• Understaffed: The Federal Student Aid office (which oversees loans) received $800M less than what the Biden admin requested in this year’s funding bill. FYI: a gov’t shutdown would only add to the processing mess.

Retailers brace for impact… While the three-year grace period was a financial boon for consumers and companies, pandemic savings have dwindled. Now, student-loan payments could pull $100B out of Americans’ budgets in the next year, with 56% of borrowers saying they’ll be choosing between making repayments and buying necessities. That’s concerning for retailers, which rely on discretionary splurges. Student loans were mentioned 40+ times in recent S&P 500 earnings calls, as the likes of Target, Walmart, and Best Buy warned they might feel a squeeze.