A nation-wide, three-year-long government pause on student loan payments is slated to lift soon, and many borrowers aren’t prepared.
According to a recent Wall Street Journal reports that the payments may feel like they’re losing 5% of their income.
As the outlet points out typical monthly loan payment will likely be between $200-$300, per Wells Fargo estimates. This totals out to about a 4% to 5% pay cut based on off U.S. median household income before taxes, according to the Wells Fargo analysis.
“I wish I could look at my finances and say, ‘You are spending like an idiot and you can cut back in all these places, and then you’ll be able to pay your student loans, but I’m not,” Erica Baker, a 26-year-old Michigan-based content strategist told the outlet.
She is one of about 37 million borrowers that has saved thousands over the past three years over the course of the three-year pause.
Right now, the national total student loan debt (including federal and private loans) sits at $1.75 trillion. The average borrower took out $28,950.What’s more, the average student loan payment $460 per month, and it usually takes the average borrower about 20 years to pay off their debts.
“It’s like a whole new bill popping up,” Andrew Read, a 39-year-old software engineer who spoke with the Wall Street Journal about the anticipated shift in his finances once the pause lifts. “It’s one thing skipping a payment for a few months, but it’s another thing three years later. It’s like a distant memory.”