In the wake of student-loan payments resuming after a three-year pause, some of the most financially vulnerable student-loan borrowers are falling behind on their bills.
That’s according to a new analysis of student-loan borrowers who use the federal government’s Supplemental Nutrition Assistance Program, which helps people with lower incomes pay for groceries. In October, when student-loan payments resumed, student-loan borrowers who use SNAP benefits reported higher rates of falling behind on bills including rent and utilities than SNAP users in general, according to new monthly data from Propel, a company that makes an app called Providers, which helps low-income Americans access their SNAP benefits.
Close to a quarter (24.6%) of student-loan borrowers on SNAP paid their rent late in October, compared with 19.3% of SNAP users in general, Propel found. Some 37% of student-loan borrowers on SNAP paid their utility bills late, compared with 29.2% of SNAP users in general.
SNAP users who have student loans were also more likely to have paid only part of their rent or mortgage bills in October, compared with SNAP users in general. More than six in 10 surveyed users said they were “very” or “extremely” stressed about student-loan repayments having restarted in October.
The Propel report didn’t include data on how SNAP users with student loans fared on their bill payments prior to October.
“At this time, I see no way of affording my monthly student loan payments,” a Providers user named Angela, based in Louisiana, said in the survey. Kristen, a SNAP user in Georgia who also had student debt, said she has had to choose between feeding her kids and paying her bills.
The Propel data provides a glimpse at the impact of student-loan payments on some specific households. The research comes as there’s been much speculation about how the return of student-loan payments would affect borrowers’ individual finances and the economy as a whole. While some forecasters said payments could put a serious dent in consumer spending, that doesn’t seem to have happened so far.
A survey by the Federal Reserve Bank of New York released last month found that the payments would force student-loan borrowers to cut their spending by $56 a month on average, which would not result in a significant hit to the broader economy. The Fed researchers noted, however, that some borrowers would struggle to make payments.
That’s especially the case for low-income borrowers who attended some college but didn’t get their degree, borrowers who have less than a bachelor’s degree, female borrowers and borrowers who had not started paying back their loans before the payment pause, Fed researchers said.
It’s not clear yet how many student-loan borrowers have signed up for SNAP since payments restarted, Propel researchers said. To qualify for SNAP, a household of three must have a gross monthly income of $2,694 — about $32,000 a year — in most states. As of April, about 12.5% of the U.S. population received SNAP benefits, according to Pew Research Center.
About 22% of U.S. households had student-loan debt in 2022, according to the Federal Reserve’s latest Survey of Consumer Finance. While most student debts were concentrated in higher-income households, almost half (46%) of households that had debts had an annual household income of below $49,000, according to the Federal Reserve, with a quarter of the households holding debts having an annual income below $25,000.
Lower-income student-loan borrowers can now use a program called the Saving on a Valuable Education plan to lower their monthly student-loan payments. As of Sept. 5, more than four million borrowers had enrolled in the SAVE plan, according to the Department of Education.
From the archives (August 2023): How to sign up for SAVE, the student-loan repayment plan Biden officials are calling a ‘game changer’
Since October, the Biden administration has also announced plans to cancel student debt for certain groups of people, including those who are permanently disabled, people who have been paying debts for more than 20 years, and some public servants.
This week, the Biden administration is expected to roll out a second wave of student-debt-relief plans. The plan is not yet finalized, but based on what the Department of Education has released, it appears to target some of the hardest-hit borrowers, who often have a low income.
Read the full article here
