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Student Loan Borrowers Are Repaying Ahead of Schedule


Key Takeaways

  • Many student loan borrowers appear to have resumed making payments in advance of the Oct. 1 deadline for the pandemic-era payment pause to end.
  • Economists believe the resumption of payments will drag down consumer spending, and the economy, as households prepare to resume payments that averaged $200-$300 a month before the pandemic.
  • Borrowers may have already cut back on eating out, according to one analysis.

Well, this wasn’t supposed to happen. 

As of early September, federal student loan borrowers voluntarily resumed making payments at the same level they had been before the pandemic struck, according to data from the Treasury Department. The surge in payments, shown on the chart below, surprised some economists who had assumed borrowers would wait until the October deadline to start paying again.

Interest and required payments on federal student loans were paused in March 2020  to help borrowers grapple with the financial fallout and job losses caused by the pandemic. The pause was one of the last remaining pandemic-era government financial supports, with interest beginning to accrue again this month and required payments scheduled to resume Oct. 1.

Many economists had expected household budgets, consumer spending, and the overall economy to suffer when some 38 million borrowers had to find a way to resume paying loans, which averaged $200 to $300 per month on average before the pandemic.

“Repayments appear to have picked up earlier than we were expecting,” Stephen Juneau, U.S. economist at Bank of America Securities, wrote in a commentary this week. “The premature spike in repayments in August suggests that borrowers were largely prepared for the resumption in repayments and have probably made the required adjustments to spending.”

That means the widely-anticipated hit to consumer spending may already have happened, and may have hit restaurants especially hard, Ian Shepherdson, chief economist at Pantheon Macroeconomics wrote in a commentary, citing data from restaurant booking site Opentable.

“The near-real-time data suggest that early repayments of student loans have been financed at least in part by cuts to discretionary spending,” he said. 

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.