Unless Congress passes more relief measures for student loan borrowers, they will be required to resume their monthly payments on Oct. 1. And new graduates, entering one of the most troubled labor markets in history, wouldn't see any help with their loans.
That could result in financial disaster for millions of borrowers, experts say.
The historic $2 trillion stimulus package Congress passed in March granted student loan borrowers a six-month break from their monthly payments during which interest wouldn't accrue on their debt.
Yet nearly half way into that reprieve, the economy is still in dire shape.The National Bureau of Economic Research announced recently that the U.S. is officially in a recession. Unemployment levels haven't been this high since the Great Depression era.
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"The payment pause and interest waiver should be extended because the disruption is ongoing and the recovery will be sluggish," said Mark Kantrowitz, a higher education expert.
House Democrats, in their $3 trillion HEROES Act, called for extending the break for another year, until Sept. 30, 2021. Yet President Donald Trump quickly called the legislation package "dead on arrival."
It's unclear if Republicans in the Senate will want to let student loan borrowers off the hook for another year, Kantrowitz said, "but, given that 2020 college graduates are graduating into the worst job market ever, I think an extension is likely."
People with student debt were already struggling before the coronavirus pandemic paralyzed the economy. Outstanding education debt has outpaced credit card and auto debt over the last decade, and the average college graduate leaves school $30,000 in the red, up from $10,000 in the 1990s. Every day, 3,000 borrowers go into default.
Tuition and fees plus room and board for a four-year private college averaged $49,870 in the 2019-20 school year; at four-year, in-state public colleges, it was $21,950, according to the College Board.
Now, with half the adult population out of work, many borrowers will find it impossible to come up with hundreds of dollars a month for their student loans. More than 23% of people aged 20 to 24 are currently unemployed, compared to around 13% of the general population. Still, college graduates were excluded from the expansion of unemployment benefits under the CARES Act.
A House bill with bipartisan support would allow this year's college graduates to postpone their student loan payments for three years without interest accruing. Meanwhile, Sen. Mitt Romney, R-Utah, has introduced legislation in the Senate that would do the same.
"Students graduating from college this year are suddenly facing significant hurdles entering the workforce," Romney said in a statement, adding that it would ease the burden on students to allow them "to defer their payments until the economy regains normalcy."
It's all but guaranteed that delinquencies and defaults would rise if the pause on payments isn't extended, explained Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
We don't want people to risk their safety to be able to afford their student loan payments.Persis Yudirector of the Student Loan Borrower Assistance Project
"I don't think the economy is going to be in a place where people can resume making payments at the end of September," Yu said.
And she expressed concern that borrowers' debt could push them back to work earlier than would be safe.
More and more older Americans, who are especially vulnerable to the coronavirus, are saddled with student debt. Some 2.8 million people in the U.S. over the age of 60 have education debt, a number that has quadrupled from 700,000 in 2005 and continues to swell.
"We don't want people to risk their safety to be able to afford their student loan payments," Yu said.
Do you think you'll be able to start repaying your student loans on Oct. 1? Why or why not? Email me at annie.nova@nbcuni.com