In the US, resumption of pupil reimbursements raises default fears

About 40 million Americans will resume student loan payments in May. At the risk of seeing an increase in defaults on all loans, according to the New York Fed.

The cost of studying in the United States is incomparably comparable to that in France. In France, studying at the university is almost free: €170 a year for a bachelor’s degree, €243 a year for a master’s degree. At school, it takes between 9,000 and 15,000 a year for a maximum of five years. Across the Atlantic, for example, it takes $82,000 a year to study at Harvey Mudd College in California.

” READ ALSO – Fifty American Universities Cost More Than $60,000 a Year

About 40 million Americans will start paying off their student loans next May after a two-year hiatus, at risk of seeing a rise in defaults on all loans, according to a study by the New York Fed. These borrowers “will likely experience a significant increase in defaults, both for student loans and other debt, once the moratorium expires”stress, in this study published Tuesday, Jacob Goss, Daniel Mangrum and Joelle Scally, economists at the New York branch of the American central bank (Federal Reserve, Fed).

Defaults on other loans are increasing

A pause in payments on certain student loans was enacted in March 2020 by former President Donald Trump and later extended several times by Joe Biden, now until May 1, 2022. “Millions of people with student loans are still dealing with the impact of the pandemic and need more time before they can resume payments”, explained the American president. About 80% of borrowers were able to benefit from this moratorium.

But for others who had to keep paying student loan maturities, defaults on other loans multiplied. The study authors note a 33% higher default rate on loans – excluding students and real estate – among these borrowers compared to those who didn’t have to worry about their student debt. And they fear that with the scheduled resumption of payments for all borrowers, these difficulties will multiply.

Total student loan value reaches $1.7 trillion

“Policy makers considered several proposals to soften the end of the moratorium”, they point. Some even want the total cancellation of at least some of the student debt, and 85 elected Democrats sent a letter to that effect to Joe Biden in late January.

According to a Fed report dated June 2021, the total amount of student loans in the United States has now reached $1.7 trillion, the second largest item of household debt behind real estate.

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