End of Federal Student Loan Forbearance puts Borrowers under Significant Stress

As federal student loan forbearance concludes, a new survey by Achieve reveals that nearly half of borrowers are under significant stress. The forbearance, initiated in March 2020, aimed to reduce financial pressures during the COVID-19 pandemic. Yet, as payments are set to restart in October, borrowers face an economic backdrop of escalating inflation, high interest rates, and unparalleled debt levels.

Achieve’s survey presented these findings:

  • 45% of respondents expressed profound stress over restarting their student loan repayments.
  • 28% anticipate the need to accrue more debt for maintaining financial equilibrium.
  • 24% foresee requiring financial assistance or provisions for hardship.
  • 29% felt more encumbered by their student loans than at the beginning of the forbearance.

In line with these financial pressures, Freddie Mac, one of the government-sponsored mortgage enterprises in the U.S., implemented new requirements for borrowers with student loans. As of September 6, mortgage companies are instructed to list a non-zero payment for borrowers with educational debt, even if the borrower’s income qualifies for no payment. This adjustment appears to anticipate the end of pandemic-related forbearance for educational loans.

“Student loan forbearances brought relief for millions during the uncertain times of the COVID-19 pandemic,” said Andrew Housser, co-founder and co-CEO of Achieve. “But after more than three years, many consumers are now bracing for significant adjustments to their household budgets. Many will even have to delay major life plans and milestones in order to manage their student loans, existing debts and other day-to-day expenses.”

Despite efforts by the Biden administration to broaden student loan relief opportunities, some measures, including a vast forgiveness initiative, were hindered by court interventions. Post-forbearance, certain late fees, and negative credit reporting will be suspended for about a year, giving borrowers a transition period. However, those failing to meet their commitments might accumulate more debt.

This convergence of factors — end of loan forbearance, spiraling economic pressures, and new mortgage requirements — has made the financial landscape even more intricate for borrowers. As many navigate these changes, there’s a palpable need for support and clear guidelines to prevent further financial strain.

For existing homeowners, relief may be in sight. ACB Mortgage Solutions has access to a suite of programs designed specifically to help borrowers who are about to be impacted by the return of their student loan payments. These programs are designed to consolidate your student loans, reduce monthly payments, improve your cash flow, and manage this financially challenging time.

Interested in exploring the Student Loan Buster? Schedule an appointment to talk to an ACB Mortgage Solutions specialist today!

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