🚘💼 Di Skul Fees Waya-waya Don Dey Reach E Last Bus-Stop: Di Student Loan Tori Wey Go Shake Economy

No be small tin dey happen for we kontri, as e be like sey di ‘free period’ for student loan sef wan pack kaya comot for road. Di arrangement wey White House and dem people wey dey represent di kontri people for Congress bin get don talk sey make dem student loan payments no siddon for one place pass August 30. 💰💔

Na after like three years, wey dis wahala for student loan never tey waka, e go come be like sey na $185 billion wey suppose don enta government account no fit show, na wetin Goldman Sachs people sef calculate. Dis thing no be small one for wey people wey collect di loan, and e go come really touch di whole kontri economy. 👥📈

Research people don look am, dem talk sey no be sey di money waya-waya just free people pocket, e come join body increase people credit score sef. Dem talk sey na because dem government relief things and sey dem comot student loan wahala from credit report na him give people mind to dey borrow more money buy motor, house and oda tins wey dem need, and e come dey fear dem sey as another monthly bill go start to dey show face, di matter fit rough for di people wey collect loan. 💸🚗🏠

As e be sey CARES Act for 2020 don help people wey get loan from federal government skip payments, na so e comot bodi for where di Biden administration dey think to forgive up to $20,000 student debt. Supreme Court go talk dia mind about dis one by di end of month. 💡🏛

Na to helep families wey di money no too dey hand when plenty people no dey work na him make dem start dis moratorium. E come even reach house, motor and oda consumer debt, and some private people wey dey borrow people money sef follow dem do. 🏠🚘💼

By 2021 reach May, na so paper from Brookings Institution come talk sey na 72 million people bin push $86.4 billion loan payment to future, e plenty for house money matter pass. As dem hold dia loan, people wey dey suffer pass come reduce well well, and e no allow dat kind trouble wey scatter ground during recession time come. 📄💣🔮

But as people start to dey pay dia oda debt, for 42.3 million people, dis student loan holiday, wey everybody wey get federal loan dey enjoy, and no interest dey add, e continue. Even sef, Biden administration extend am reach nine times as dem dey think wetin go be permanent solution, even as aid programs like unemployment insurance, better pikin tax credit and extra food help don finish. 👨‍👩‍👧‍👦💳🍽

Plenty people, wey Federal Reserve sef calculate sey dem bin dey pay like $200 to $299 every month for 2019, soon dem go start to dey see bill wey na one of di big tins for dia home budget. Dem talk sey one woman wey dem call Jessica Musselwhite borrow like $65,000 take do her master degree for arts administration and nonprofit management, and when she finish for 2006, na only $26,500 her work pay her every year. Her monthly student loan payment come dey chop like half of her salary. 💔🎓💵

She come join plan wey dey look income to take know how much she go pay, but as interest dey add, she no fit touch di main money. By time wey corona wahala start, even as she get work for University of Chicago, she owe pass as e be when she graduate, plus credit card debt wey she collect buy food and oda important tins. 😷🎒💳

As she no dey pay di loan again, she come see chance do oda tins. E helep am and her person buy small house for South Side, and dem start to do some betament for di house like better air conditioning. But e come bring oda wahala – more debt. 🏡💸🔨

As time dey reach to start to dey pay di loan again, she no know how much she go dey pay every month, but she dey think where she go cut money. Her person own student loan go soon start to dey show face too. ⏰💭💔

As student loan dey go up and money wey dem dey pay people no dey move, di kind experience wey Jessica dey see, where di money she dey owe no dey reduce na him plenty people dey face, na 52.1 percent of people wey collect loan na im dey see am so for 2020, according to Ms. Beamer wey dey check higher education finance and her people for Jain Family Institute. E be like sey na because interest dey add while people fit only pay small-small, or even less. 📚👩‍🎓🎓

As di share of people wey owe pass when dem start dey grow before pandemic, na so e come start to reduce, as people wey continue to dey pay dia loan fit get some ground as interest rate na zero. 💱⚖🎯

Dis small break epp families wey get pikin well well, economists for Federal Reserve talk. E reach more for black families wey get pikin pass white and Hispanic families, even if na small money dem dey pay every month before corona wahala. (Na black families’ small salary na him cause am, no be say dia loan plenty pass; 53 percent of black families no even dey pay before di pandemic.) 👨‍👩‍👦‍👦🔍💵

Wetin people wey get di loan dey do with di extra money for dia hand? Economists for University of Chicago talk sey instead to pay oda debt, people wey get break take chance increase dia debt by 3 percent on top, or $1,200, if you check with people wey no get di break. If you get small extra money, you fit turn am to big spending if you dey pay small-small for line of credit, wey plenty people like, especially as interest rate na small at di beginning of pandemic. 📉💲📊

Another way to look am, na sey Consumer Financial Protection Bureau talk sey half of all people wey go start to dey pay dia student loan again get oda debt wey reach like 10 percent pass as e be before di pandemic. 🔄🏦💔

Dis matter fit wahala people wey dem student loan been dey give dem wahala before pandemic. Those people collect 12.3 percent pass for credit card debt and 4.6 percent pass for car loan debt pass people wey get wahala wey no get di break, na so paper by finance professors for Yale University and Georgia Tech talk. 🎓🚗💳

For di last few months, di paper come see sey those people don start to dey fail for dia loans more – e come be like sey as dem go start to dey pay student loan again, e fit push more people enter default. 😷📉📚

“One of di tins wey we dey prepare for na sey, as di student loan go come again, people go need choose wetin dem go pay and wetin dem no go pay,” na so David Flores, director of client services with GreenPath Financial Wellness, wey be non-profit counselling service talk. “And na credit cards na im people no dey pay.” 💳🗂💔

For now, Mr. Flores dey tell people make dem join plan wey dey look dia income to take decide how much dem go pay if dem fit. Biden administration don talk sey dem go make dat kind plan sweet pass. 👏🏦💵

Also, di proposal for di administration to forgive debt, if Supreme Court agree, go cut di hit wey people go feel from 0.2-percentage-point to personal spending for 2023, according to researchers for Goldman Sachs. ⚖💸👨‍⚖️

Whether dem agree forgive debt for court or not, di way wey we go return to loan payment fit dey rough. Plenty big student loan servicers don end dia contract with Department of Education and move dia work give oda people, and di department no get enough money again for student loan processing. 🏦🔄💰

Some experts think sey di break no good, especially as e dey cost federal government like $5 billion every month by some estimates. 🤔💵📊

“I think e make sense to do am. But di real question na, na when dem suppose turn am on again?” na so Adam Looney, professor for University of Utah wey talk before Congress on top student loan policy for March talk. 🎓🗣💡

Ideally, di administration suppose don decide on changes and end di break before in a way wey dem plan, Dr. Looney talk. 😷🔄🎯

Anyhow, as di break wan finish, e go control spending for plenty families. For Dan and Beth McConnell of Houston, wey still get $143,000 to pay for dia two daughters’ undergraduate educations, e go shake dem well. 🎓💵👩‍🎓

As Mr. McConnell, 61, lose im job as marine geologist for late 2021, di break for dia monthly payments epp am well well. He dey do some consulting work but e no think sey e go fit get di kind money wey e been dey get before. E fit mean sey dem go stop long-term care insurance, or dig into retirement accounts, when $1,700 monthly payments go start for fall. 🌊🔬🛠

“This na di brick through di window wey go break di retirement plans,” Mr. McConnell talk. 😱💔🏦

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NOW IN ENGLISH

🚘💼 The Student Loan Conundrum: A Ticking Economic Time Bomb

There’s a significant shift looming in the country, as the ‘grace period’ for student loan repayments appears to be coming to an end. The White House and Congress have agreed that federal student loan payments should recommence after August 30. 💰💔

The repercussions of a nearly three-year long pause on student loans could mean an approximate $185 billion that was meant to be in the government’s coffers will be missing, according to Goldman Sachs. This would not only burden individual borrowers but also considerably affect the national economy. 👥📈

Studies show that the pause in payments didn’t merely free up personal funds; it also positively affected people’s credit scores. Government relief efforts and the removal of student loan debt from credit reports encouraged people to take on more debt for purchasing cars, homes, and other necessities. The concern now is that the addition of another monthly bill might destabilize the financial situation of borrowers. 💸🚗🏠

The CARES Act of 2020 allowed federal loan borrowers to defer payments, easing the pressure on the Biden administration as it considers forgiving up to $20,000 in student debt. The Supreme Court is expected to give a verdict on this issue by the end of the month. 💡🏛

The moratorium was introduced to support families struggling financially during a time of widespread unemployment. It even extended to mortgages, auto, and other consumer debts, with some private lenders also participating. 🏠🚘💼

A report from the Brookings Institution in May 2021 stated that about 72 million people deferred $86.4 billion in loan payments, significantly impacting household finances. The pause in loan payments alleviated financial distress for many and staved off the kind of turmoil that was seen during the recession. 📄💣🔮

Yet, for 42.3 million people, the student loan holiday, which everyone with a federal loan was entitled to, and which accrued no interest, continued. The Biden administration extended it nine times as it sought a permanent solution, even as other aid programs like unemployment insurance, child tax credits, and food assistance expired. 👨‍👩‍👧‍👦💳🍽

Many people, who the Federal Reserve calculated were paying between $200 to $299 per month in 2019, will soon see a bill that will take a considerable chunk out of their household budget. For instance, Jessica Musselwhite borrowed about $65,000 for a master’s degree in arts administration and nonprofit management. On graduating in 2006, she earned just $26,500 annually. Her monthly student loan payment amounted to nearly half of her salary. 💔🎓💵

She enrolled in an income-based repayment plan, but as the interest accrued, she couldn’t touch the principal. By the time the pandemic began, despite having a job at the University of Chicago, she owed more than she did at graduation, plus credit card debt acquired for necessities like food. 😷🎒💳

With the pause in loan repayments, she managed to do other things. It helped her and her partner purchase a small house on the South Side, and they started making home improvements like installing better air conditioning. But this also brought along more debt. 🏡💸🔨

As the time to recommence loan repayments approaches, she doesn’t know how much she’ll have to pay each month, but she’s thinking about where she can cut costs. Her partner’s student loan payments will also resume soon. ⏰💭💔

With rising student loans and stagnant wages, many people are in the same boat as Jessica, finding their debts don’t decrease. In 2020, 52.1 percent of borrowers faced this issue, according to Ms. Beamer from the Jain Family Institute, who studies higher education finance. It seems to be because interest accrues while people can only make small, or even lesser, payments. 📚👩‍🎓🎓

While the number of people owing more than they initially borrowed was rising before the pandemic, it began to decrease as those continuing their loan payments could make some progress due to zero interest rates. 💱⚖🎯

This brief reprieve significantly benefited families, especially those with children, as per economists at the Federal Reserve. It was particularly beneficial for black families with children, more so than white and Hispanic families, even if they were making small payments before the pandemic. (This is due to lower average income in black families, not higher loan amounts; 53 percent of black families were not making payments before the pandemic.) 👨‍👩‍👦‍👦🔍💵

What did borrowers do with their additional disposable income? Economists at the University of Chicago found that rather than paying off other debts, those who received the reprieve increased their debt by an additional 3 percent, or $1,200, compared to those who didn’t have the break. With a little extra money, they could engage in more spending by drawing on lines of credit, which was especially appealing as interest rates were low at the beginning of the pandemic. 📉💲📊

Another perspective is provided by the Consumer Financial Protection Bureau, which found that half of all borrowers who will soon resume their student loan payments have other debts that have increased by about 10 percent since before the pandemic. 🔄🏦💔

This could spell trouble for those who were already struggling with their student loans before the pandemic. These individuals took on 12.3 percent more credit card debt and 4.6 percent more car loan debt compared to those who didn’t get the break, according to a paper by finance professors at Yale University and Georgia Tech. 🎓🚗💳

Over the last few months, the study found an increasing number of these people are failing to keep up with their loan repayments, suggesting that the resumption of student loan payments could push more people into default. 😷📉📚

“We’re bracing for the reality that, when student loans are reinstated, people will have to choose what they can and can’t pay,” said David Flores, director of client services with GreenPath Financial Wellness, a non-profit counseling service. “And it’s often the credit cards that don’t get paid.” 💳🗂💔

Currently, Mr. Flores advises individuals to enroll in income-driven repayment plans if they can. The Biden administration has proposed making these plans more beneficial. 👏🏦💵

Moreover, the proposal for the administration to forgive debt, if approved by the Supreme Court, could reduce the impact on personal spending by 0.2 percentage points in 2023, according to researchers at Goldman Sachs. ⚖💸👨‍⚖️

Whether or not debt forgiveness is approved, the return to loan payments could be challenging. Several major student loan servicers have ended their contracts with the Department of Education and handed over their work to others, leaving the department lacking funds for student loan processing. 🏦🔄💰

Some experts believe that the pause is not beneficial, especially as it’s costing the federal government around $5 billion per month by some estimates. 🤔💵📊

“I think it made sense to do it. But the real question is, when should they turn it back on?” asked Adam Looney, a professor at the University of Utah, who testified before Congress on student loan policy in March. 🎓🗣💡

Ideally, the administration should have decided on changes and ended the pause in a planned manner, according to Dr. Looney. 😷🔄🎯

In any case, as the pause comes to an end, it will control spending for many families. For Dan and Beth McConnell of Houston, who still owe $143,000 for their two daughters’ undergraduate educations, it will be a shock. 🎓💵👩‍🎓

When Mr. McConnell, 61, lost his job as a marine geologist in late 2021, the pause in their monthly payments was a great relief. He’s doing some consulting work, but he doesn’t think he will make as much as he used to. They might have to cancel their long-term care insurance, or dip into retirement savings, when $1,700 monthly payments start in the fall. 🌊🔬🛠

“This is the brick through the window that breaks the retirement plans,” Mr. McConnell said. 😱💔🏦