– In a good month, Celina Chanthanouvong has about $200 left after rent, groceries and car insurance. That doesn’t factor in her student loans, which have been on hold since the start of the pandemic and are estimated to cost $300 a month. The pause in repayment has been a lifeline keeping the 25-year-old afloat.
“I’m not going out. I don’t buy Starbucks every day. I’m cooking at home,” she said. “And sometimes, I don’t even have $100 after everything.”, Chanthanouvong would be eligible to get $20,000 of her debt erased, leaving her owing $5,000. But she isn’t banking on the relief. Instead, she invited her partner to move in and split rent. The financial pinch has them postponing or rethinking major life milestones.
Yet borrowers with lower balances are the most likely to default. It's fueled by millions who drop out before graduating, along with others who graduate but struggle to find good jobs. Among those who defaulted in 2021, the median loan balance was $15,300, and the vast majority had balances under $40,000, according to the Federal Reserve Bank of New York.
With the payments paused, she felt a new level of financial security. She cut costs by living with her parents in New York City and her job at a nonprofit paid enough to save money and help her parents.“Being able to do stuff for my parents and having them experience that luxury with me has just been such a plus,” said Hoque, who works for Young Invincibles, a nonprofit that supports student debt cancellation.
“The volume of borrowers going back on the system at the same time — this has never happened before,” Rotunda said. “It's fair to say it's going to be bumpy.”