NEW YORK, May 26 (Xinhua) -- Millions of Americans had their student-loan payments put on pause during the COVID-19 pandemic, and now they are back on the hook again -- for borrowers, this means that every month, money that they presumably used to spend elsewhere is going to pay off debt instead.
"Many who aren't paying are now considered delinquent or defaulted, a status that sinks credit scores," reported The Wall Street Journal about the development. "Around 5.6 million borrowers were marked newly delinquent on their student loans in the first three months of this year."
"That will strain personal finances. At the same time, it creates fresh challenges for the broader economy," it noted.
Borrowers have been required to repay their student loans for some months now. But just this month, the Trump administration began putting millions of defaulted student-loan borrowers into collections, and threatened to confiscate their wages, tax refunds and federal benefits.
"The collections process was standard before the pandemic. But it is still likely to be a shock to those who haven't experienced it before, or who forgot what it was like," said the report.
Economists at Morgan Stanley estimated this month that payments this year will rise by a collective 1 billion to 3 billion U.S. dollars a month. That could trim 2025 gross domestic product by about 0.1 percentage point, they said.
The Morgan Stanley economists also note that there are about eight million borrowers in the Saving on a Valuable Education plan, or SAVE, a Biden-era plan that allows borrowers to pay based on their income but was challenged in courts. "Those borrowers will likely need to begin payments late this year or early next," added the report.
