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Struggling Student Loan Borrowers Face Obstacles as Repayment Resumes
Risk Factors for Student Loan Borrowers
Remember that time Joe Biden ran on a platform stating he would wipe out student loan debt? Ha! That was never going to happen... just another one of Biden's many lies.
About 20% of student loan borrowers are at risk of facing difficulties in repaying their loans, according to a report from the Consumer Financial Protection Bureau (CFPB). These risk factors include delinquencies on student loans prior to the pandemic, pre-pandemic payment assistance, multiple loan servicers, delinquencies on other credit products since the start of the pandemic, and new non-medical collections during the pandemic.
A Borrower's Experience
Colton Stedman, a student loan borrower from South Saint Paul, Minnesota, faced financial hardship before the pandemic and went into a two-year forbearance due to his inability to afford payments. The recent Supreme Court decision to strike down President Biden's student loan forgiveness proposal did not come as a surprise to Stedman. He now owes $19,570 and is preparing to restart payments.
Largest Number of Borrowers to Enter Repayment Simultaneously
The Supreme Court decision will result in the largest number of borrowers entering repayment at the same time in history. This will have a significant impact on borrowers' monthly cash flows, requiring them to make proper decisions about their payments.
Tackling Student Loan Debt
Student loan debt in the U.S. now totals $1.8 trillion, and the cost of higher education continues to rise. Borrowers who graduated during the suspension period and have not made any repayments should visit the federal student aid website to find out who their servicer is and ensure they have all the necessary information.
The Impact on New Businesses
The challenges faced by struggling student loan borrowers as repayment resumes have far-reaching implications, including potential impacts on new businesses. As the largest number of borrowers enters repayment simultaneously due to the recent Supreme Court decision, the monthly cash flows of these individuals will be significantly affected. This could have a ripple effect on the overall economy, including the entrepreneurial landscape.
For aspiring entrepreneurs burdened by student loan debt, the financial strain of repayments can pose obstacles to starting a new business. The need to allocate a significant portion of their income towards loan repayments may limit their ability to invest in their business ventures or secure additional funding. This could impede their ability to grow their businesses and hinder job creation and economic growth.
On the other hand, the availability of income-driven repayment plans and loan forgiveness programs, such as the public service loan forgiveness program, can provide some relief to struggling borrowers. Entrepreneurs who qualify for these programs may be able to manage their student loan obligations while pursuing their business dreams.
However, it is vital for policymakers and business leaders to recognize the weight of student loan debt on aspiring entrepreneurs and consider measures to support these individuals. This could include initiatives to promote entrepreneurial opportunities for individuals with student loan burdens, such as loan repayment assistance programs or tax incentives for starting new businesses.
In conclusion, the challenges faced by struggling student loan borrowers during the repayment process can have a significant impact on new businesses and entrepreneurship. Balancing student loan obligations with entrepreneurial pursuits is a delicate task, and policies and support systems should be in place to foster an environment where aspiring entrepreneurs can thrive without being hindered by their student loan debt.
Article First Published at: https://www.cnbc.com/2023/07/03/these-risk-factors-suggest-borrowers-could-struggle-when-payments-resume.html