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Debt ceiling deal will have big impact on student loans

With the debt ceiling deal, the student loan payment pause that started during the pandemic could soon be coming to an end. Payments could resume in August 2023.

ODESSA, Texas — In March 2020, at the start of the pandemic, student loan payments were put on pause.

"So the student loans have been on pause, in another words been forbarren, so people haven’t had to make any payments or have any interest accrued since the COVID shutdown," said Mickey Cargile, president of Cargile Investments.

However, that may soon be coming to an end.

"That’s coming to an end now," said Cargile. "Under this bill, payments will resume in August."

According to the debt ceiling bill, the pause on federal student loan payments will "cease to be effective," and borrowers will be required to resume paying their loans 60 days after June 30. Payments will also see a 5.5% interest rate. That's 2.5% more than before the pause started. 

With this only being months, Cargile said it's best to prepare now.

"Now it’s time to start planning in your budget to resume those payments again," said Cargile. "It’s always difficult to make payments, that’s the bad thing about borrowing money is that you have to pay it back later. But it is time to just get it built into your budget. If you budget properly, you’ll be fine with it. But you do have to budget for it, and make sure you don’t spend that money before it’s time to make the payment."

However, since nearly 40 million borrowers haven't had to make their payments the last three years, the delinquency rate could go up.

"I expect there’s probably going to be a higher delinquency rate than normal, just because people aren’t used to making payments, and a lot of people are counting on the student loan forgiveness program, which looks like it will not happen," said Cargile. "So with those things, I expect there will be more delinquency, more people not making their payment. But I do believe the majority of people will make their payments and keep their debts current."

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