Thousands of South Carolinians are on the verge of rescheduling their student loan payments as temporary debt relief measures expire in early fall.
Borrowers received a respite under the COVID-19 stimulus package in March 2020 when the Trump administration suspended repayments, lowered interest rates to zero, and halted collections on delinquent federal loans. The relief did not apply to school-related debt from private lenders.
President Joe Biden’s administration then extended the hiatus until September 30, when it expired.
As of September 30, approximately 704,000 residents of South Carolina reported $ 26.8 billion in federal student debt StudentAid.govalthough it is unclear how many of them stopped writing monthly checks under the state relief plan.
Since the repayment has been postponed, defaulting loans from the pre-COVID era are no longer considered to be delayed for the time being, according to Schufa Experience. This resulted in a steep decline in the number of borrowers with past due debt in Palmetto State and across the country. At the end of 2019, 14 percent of student loan holders in South Carolina were behind on their payments, according to survey data from Federal Reserve Bank of New York. This number had dropped by almost half to 7.6 percent by the end of 2020.
On the flip side, the total volume of student debt across the country has soared to record highs during the pandemic as payments have been pushed into the background, Experian reported. At the same time, new loans were added to the loan portfolio.
How much temporary forgiveness benefited the economy is difficult to quantify, said Bill Hauk, an economist at the University of South Carolina. Any benefits would be difficult to see from other parts of the rescue package, such as economic checks, although he noted that the relief has undeniably helped many people avoid a full blown financial crisis.
And the New York Fed poll, for example, found that bipartisan stimulus packages helped drive credit card balances to all-time lows. Bankruptcies are also at a “new historical low”.
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Meanwhile, consumer spending, especially for discretionary spending like eating out, has risen sharply again, Hauk said.
“Given the shock that hit the US economy, I think we weathered it relatively well,” he said. “A lot of these programs ended up cushioning what could have been a really big blow to the economy.”
Over time, student loans have made up a larger portion of the South Carolinians ‘debts – although mortgages remain the single largest item on most borrowers’ credit reports.
In 2005, about 5 percent of the South Carolinians’ debt was tuition fees and other school expenses. Last year, this number almost tripled to 14 percent.
According to the Urban Institute, minorities are disproportionately affected by the debt burden. The group’s data shows that 17 percent of student loan borrowers in South Carolina’s colored communities were in default, compared with 12 percent overall.
Also, more student loan holders in South Carolina are lagging behind on school bills than the national average, according to the Urban Institute.
To reach Mary Katherine Wildeman at 843-607-4312. Follow her on Twitter @mkwildeman.