With 27 Million Set to Resume Payments, Many Student Loan Borrowers Already Managing Increased Debt Since Pre-Pandemic
- Insightful study on student loan payments
- Reveals potential financial burden for borrowers
- None.
New TransUnion study shows that one in five of those borrowers are set to add a payment of
CHICAGO, July 19, 2023 (GLOBE NEWSWIRE) -- The average consumer with a student loan carries about
The U.S. Department of Education has directed that student loan delinquencies not be reported to the credit bureaus for 12 months until September 30, 2024, helping to protect consumers’ credit as they manage these new payments. The TransUnion study looked at the anticipated impacts of these restarted payments on consumers’ wallets.
TransUnion’s study found that as of May 31, 2023, 40.6 million consumers possessed student loans, totaling
While current Department of Education plans for student loan forgiveness could alleviate payment requirements for some borrowers once finalized, most of this group will be facing monthly student loan payments for the first time in years. These borrowers will experience a payment shock as they attempt to recalibrate their monthly budgets to accommodate this new payment.
“The majority of consumers with a student loan have not been required to make payments for the better part of three years,” said Liz Pagel, senior vice president and head of TransUnion’s consumer lending business. “Payment amounts will vary, but many of these consumers have taken on additional debt since the last time they had to pay their student loans. It’s important for both lenders and consumers to be prepared for this new payment shock.”
Student Loan Borrowers Increased Debt Loads on Other Credit Products During the Pandemic
One of the key reasons why student loan borrowers may be particularly vulnerable to payment shock can be found in the number of borrowers who have opened new credit products since the beginning of the pandemic.
During the Pandemic, Consumers With Student Loans Added New Debt
| Product | Percentage of Student Loan Borrowers Taking On New Product | |
| Bank Card | ||
| Auto Loan | ||
| Retail Card | ||
| Mortgage | ||
| Unsecured Personal Loan | ||
Source: TransUnion US consumer credit database; data is as of May 31, 2023;
trade defined as opened during the pandemic if opened on or after March 31, 2020.
“These additional credit products mean additional monthly payments, the accumulation of which may pose added challenges for households attempting to reintegrate student loan payments into their monthly budget,” added Pagel.
While the Department of Education has offered a 12 month runway before student loan delinquencies will have an impact on consumer credit files, interest will begin to accrue immediately so it is in the best interest of consumers to resume payments right away.
Payment Shock Impact on Student Loan Borrowers
TransUnion’s study analyzed consumers who will experience a payment shock across a range of dimensions. These areas included generational breakdowns and credit risk ranges to determine how large their expected student loan payments will be once they are restarted.
The study showed that about
The study also showed that these figures did not vary significantly when viewed across credit risk tiers. For instance, between
Older Consumers Are Expected to Have Higher Student Loan Payments Due
Than Their Gen Z Counterparts
| Monthly Payment | Silent | Baby Boomer | Gen X | Millennial | Gen Z | |||||
| Percent of Consumers with Payments < | ||||||||||
| Percent of Consumers with Payments > | ||||||||||
Source: TransUnion US consumer credit database; data is as of May 31, 2023.
“Regardless of credit risk range, the sudden addition of a new regular monthly payment on top of existing obligations can prove challenging for any household,” said Margaret Poe, head of consumer credit education at TransUnion. “It’s important that student loan borrowers who know or anticipate that their payments are likely to resume soon should begin assessing their monthly budgets, making any needed adjustments as soon as possible to help mitigate the impact of these payments.”
To learn more, click here to register for our upcoming webcast, “Implications of the End of Pandemic-Era Student Loan Forbearance.”
To better understand how a student loan payment shock may impact a consumer wallet, lenders can leverage TruVision Premium Student Loan Attributes, TruVision Trended Usage Payment Ratio Algorithms and TruVision Trended Liquidity Algorithms.
About TransUnion (NYSE:TRU)
TransUnion is a global information and insights company with over 12,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.
http://www.transunion.com/business
| Contact | Dave Blumberg |
| TransUnion | |
| david.blumberg@transunion.com | |
| Telephone | 312-972-6646 |
FAQ
What does the new TransUnion study reveal about student loan borrowers?
When was the study released by TransUnion?
What is the average consumer with a student loan carrying?
