Student Loan Repayments Could Impact US Economy

  • The Supreme Court killed the Biden administration’s loan forgiveness program.
  • Americans will begin repaying student loans in October.
  • The US economy could be impacted by the loan repayments. 
  • Moody’s Analytics warns the repayments could put pressure on the retail industry.

( – At the beginning of the national health emergency, then-President Donald Trump and Congress quickly took action to help the American people navigate the crisis. They passed a number of policies to try to mitigate the damage to the middle class, including pausing student loan repayments in March 2020. When President Joe Biden took office, he extended the moratorium on loan repayments.

More than three years after the Trump administration took action, the payment pause is set to end. Millions of Americans will have to once again start paying their loans off. There’s a possibility that it could hurt the economy.

Student Loan Payments to Resume

Americans across the country are revising their budgets and making room for their student loan repayments that will begin on October 1. The loans began accruing interest again on September 1. Unlike times in the past when the loan repayment pause was extended, that won’t happen again. That’s because of a debt ceiling deal negotiated by Congress in June to keep the government running.

The decision to lift the payment pause followed a ruling by the Supreme Court striking down Biden’s student loan forgiveness policy. Several Republican states sued to stop the policy from going into effect. The president responded by rolling out a scaled-back forgiveness plan that is also facing court challenges.

Economic Woes

The United States economy is propelled by consumer spending. Although many manufacturing jobs have come back to America in recent years, consumption still accounts for approximately 70% of the country’s gross domestic product (GDP). That’s the monetary value of all the goods and services produced and sold in the country.

When Americans begin repaying their student loans, they will have less disposable income in their budgets. That means less money will flow through the economy. In July, Moody’s Analytics published a report warning that student loan repayments could put pressure on the retail industry and make the affordability crisis worse. The report also warned it’s going to be a “major financial shock and additional burden to younger renters or millennials.”

Moody’s Analytics Chief Economist Mark Zandi told Newsweek that about 21 million Americans will be repaying an average of roughly $300 per month. He said the impact on the economy “will be meaningful, but small, approximately 0.2 percent of GDP.”

Copyright 2023,