{"id":26460,"date":"2023-06-23T09:09:32","date_gmt":"2023-06-23T13:09:32","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/the-end-of-the-student-loan-payment-pause-could-increase-serious-delinquencies-on-other-household-debt-bofa-warns\/"},"modified":"2023-06-23T09:09:33","modified_gmt":"2023-06-23T13:09:33","slug":"the-end-of-the-student-loan-payment-pause-could-increase-serious-delinquencies-on-other-household-debt-bofa-warns","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=26460","title":{"rendered":"The end of the student-loan payment pause could increase \u2018serious delinquencies\u2019 on other household debt, BofA warns"},"content":{"rendered":"
\n

The return of student loan payments could lead to borrowers not paying back debt as their expenses mount, according to Bank of America.<\/p>\n

While consumers have been paying their debt back and delinquencies are \u201csubdued for now,\u201d they\u2019re rising, the bank wrote in a note this week.<\/p>\n

\n

A rising number of people have been more than 30 days late on their auto loans and credit-card debt, BofA
\n BAC,
\n -2.14%<\/bg-quote>
\n noted, and the share of people who are seriously delinquent on loans, or more than 90 days late on their debt, has risen above pre-pandemic levels.\u00a0<\/p>\n

If student loan payments resume in full, \u201cwe estimate that serious delinquencies could rise by about 67% over time,\u201d BofA stated, \u201cwith risks of knock-on effects to other forms of household debt as well.\u201d<\/p>\n

The Consumer Financial Protection Bureau estimated that more than 1 in 13 student loan debtors are currently behind on their other payment obligations.\u00a0<\/p>\n

For borrowers, not paying back student loans would have serious implications for their overall finances: Missing a student loan payment could result in a big negative impact on their credit score. For a borrower who has a credit score between 350 to 850 \u2014 which is a large range \u2014 missing a student loan payment could cause their score to drop by 49 to 82 points on average, VantageScore estimated.<\/p>\n

Student-loan payments are set to resume on October 1, and 26.6 million borrowers with federal student-loan debt will have to start paying back their loans again, with an average monthly payment of roughly $200 to $300, according to a separate note by Morgan Stanley
\n MS,
\n -2.13%<\/bg-quote>.<\/span>
\n \u00a0<\/p>\n

While some student-loan borrowers have already begun making adjustments to their finances to accommodate the return of student-loan payments, BofA doesn\u2019t seem as optimistic about the masses.<\/p>\n

BofA said that its strategists and analysts worry that a full resumption of payments will lead to consumers being late in paying back not just student loans but also other types of debt.<\/p>\n

\u201cIn dollar terms, such an increase would amount to $167bn of new seriously delinquent balances, which would raise total serious delinquencies across all categories of household debt by around 67% relative to their 1Q 2023 level ($249bn),\u201d the report stated.\u00a0<\/p>\n

Morgan Stanley expects consumers to pull back on spending when the pandemic-era moratorium on student-loan payments ends, because they\u2019ll have less room in their budgets.<\/p>\n

\u201cWe expect to see a hit to disposable income and a moderate pullback in discretionary spending in 4Q23,\u201d Morgan Stanley wrote.<\/p>\n

See also: <\/strong>The resumption of student-loan payments: Missing even one installment can seriously damage your credit score<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The return of student loan payments could lead to borrowers not paying back debt as their expenses mount, according to Bank of America. While consumers have been paying their debt back and delinquencies are \u201csubdued for now,\u201d they\u2019re rising, the bank wrote in a note this week. A rising number of people have been more […]<\/p>\n","protected":false},"author":1,"featured_media":26461,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-26460","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nThe end of the student-loan payment pause could increase \u2018serious delinquencies\u2019 on other household debt, BofA warns | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The return of student loan payments could lead to borrowers not paying back debt as their expenses mount, according to Bank of America. 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