Many SCs To Be Forced To Pay Off Student Debt As COVID Relief Comes To An End | Business
Thousands of Southern Carolinians are on the verge of having their student loan payments re-due as temporary debt relief measures end in early fall.
Borrowers were granted a stay in March 2020 as part of the COVID-19 stimulus program, when the Trump administration suspended repayments, reduced interest rates to zero, and halted collection on defaulting federal loans. The relief did not apply to the school-related debt of private lenders.
President Joe Biden’s administration then extended the break until September 30, when it expires.
As of September 30, approximately 704,000 South Carolina residents had federal student debt totaling $ 26.8 billion, according to StudentAid.gov, although it is not known how many of them stopped issuing monthly checks as part of the government’s back-up plan.
Because repayment has been deferred, overdue loans from the pre-COVID era, for now, are no longer considered overdue, according to the credit bureau Experiential. This has led to a sharp drop in the number of borrowers with delinquent school debts in Palmetto State and across the country. At the end of 2019, 14% of student loan holders in South Carolina were in arrears with their payments, according to data from a survey by the Federal Reserve Bank of New York. That number dropped by almost half to 7.6% by the end of 2020.
On the other hand, across the country, the total volume of student debt reached record levels during the pandemic as payments were put on hold, Experian reported. At the same time, new loans were added to the loan portfolio.
It is difficult to quantify the extent to which temporary forgiveness has benefited the global economy, said Bill Hauk, an economist at the University of South Carolina. Any benefit would be hard to discern from other parts of the relief plans, such as stimulus checks, although he noted that the relief has undeniably helped many people avoid a full-blown financial crisis.
And the New York Fed’s investigation, for example, found that bipartisan stimulus packages were credited with helping bring credit card balances to historically low levels. He also found that bankruptcies, too, are at a “new all-time low.”
Meanwhile, consumer spending, especially discretionary spending such as dining out, has skyrocketed, Hauk said.
“Considering the shock that hit the US economy, I think we’ve done relatively well,” he said. “A lot of these programs ended up cushioning what could have been a huge blow to the economy.”
Over time, student loans have become a larger part of South Carolina’s debt, although mortgages remain the largest item on the credit reports of most borrowers.
In 2005, about 5% of South Carolina’s debt was related to tuition and other school expenses. Last year, that figure almost tripled to 14%.
According to the Urban Institute, the debt burden disproportionately affects minorities. Data from the group shows that 17% of student loan borrowers in communities of color in South Carolina were in default, up from 12% overall.
More South Carolina student loan holders are globally behind in paying off their school bills than the national average, the Urban Institute also reported.
Reach Mary katherine wildeman at 843-607-4312. Follow her on Twitter @mkwildeman.