Biden Student Loan ‘On-Ramp’ Shields Borrowers Who Miss Student Loan Payments

The White House wants to offer debt relief to student loan borrowers as payments resume.

According to an announcement last week by the U.S. Department of Education, the government will set up a year-long “on-ramp” to repayments — running from Oct. 1 of this year until Sept. 30, 2024.

The Friday (June 30) announcement came as the U.S. Supreme Court struck down President Joe Biden’s student loan forgiveness program.

Although payments will be due and interest will accrue during the on-ramp period, interest will not capitalize after Sept. 30. In addition, during that period, borrowers won’t be reported to credit bureaus, be considered in default or referred to collection agencies for late, missed or partial payments.

This is happening at a time when consumers are feeling squeezed by student loans, particularly members of Generation X, whose outstanding loans come to an average of $43,438, with loan payments accounting for 8.8% of their disposable income.

“One reason for this could be that this generation is both responsible for paying off their own lingering student loans as well as possibly subsidizing their own children’s loans,” PYMNTS wrote last month.

But, as the Education Data Initiative has found, Gen X carries an outsized burden of the national student loan debt, with 39% of the country’s total. This high nationwide share, coupled with high individual repayments, could add pressure to Gen X when loan payments resume.

And it’s not just Gen X. As noted here last month, millennials with student loans stand to lose 6.5% of spending power when repayments resume, an issue that would be felt at the retail level.

“The retailers that would be hardest hit would be the ones that have been able to capture the most share of wallet in the midst of the repayment pause,” PYMNTS wrote. “Amazon stands out here, of course, because — well — it’s Amazon.”

Nearly-two thirds of American consumers are Amazon Prime members, and that massive reach covers a range of demographics and income levels, and by extension, the holders of these student loans.

Walmart might feel a pinch as well as it competes for subscriptions and share across key categories with Amazon. In the retailer’s favor is the fact that its grocery comparable sales have been growing by “low double-digit” percentage points, and it has seen increased spending from higher-income consumers.