ELMIRA, N.Y. (WETM) — Before long, some 40 million Americans will have to start paying back their debt. Initially, when the COVID outbreak began, the government put a pause on payments to banks and lenders due to the economy and the job market crashing.
As the pandemic continued, people experienced more hardship within their finances, which made it harder to make payments toward their student loans. The Biden Administration launched the COVID Emergency Relief program in January of 2021 to stop to payments and help low-income citizens who were struggling.
The economy is now making its way back to seeming normalcy with businesses reopening. As a result, banks, lenders, and loan servicers are now looking to restart collections on those debts that were deferred for the pandemic.
“The banks and the federal government need to be flexible and try to help people the best they can if they are not able to—you know, if they can prove they don’t have an income, if they’re on unemployment,” said Elmira College professor Matthew Burr. “We need to potentially be flexible and try to find opportunities to work with people. And not handcuff them with, you know, a 7 or 8% interest rate and, you know, killing their credit.”
As of September 31, the COVID Emergency Relief program will no longer be in effect. Both the federal student aid and loan servicer will contact individuals directly about restarting payments. According to EducationData.Org, approximately 42.9 million Americans with federal student loan debt each owe an average of $36,406 for their federal loans.
“That doesn’t serve a purpose at all, in my opinion, for anybody,” said Burr about the ability for financial institutions to punish those borrowers who are still struggling. “It’s just going to hurt the economy long-term.”