Student loan borrowers may struggle to buy a home as the last extension of government-mandated pauses for payments is set to expire, Newsweek reports.
According to data from the Department of Education, over 43 million Americans have student loans. 7.5 million borrowers are in default on their student loans, which can have an adverse effect on a person’s credit report.
Borrowers who fail to make timely payments as the student loan pause comes to an end will likely be hit with negative marks on their credit. Such delinquencies could make it harder to access other lines of credit, like a mortgage for a home.
“If you’re in the market for purchasing a house and have defaulted on your student loans, that process of such a major purchase just got substantially more difficult. Defaulting on student debt is a signal to future lenders you may not pay back your loan, especially a potentially sizable one,” Alex Beene, financial literacy instructor for the University of Tennessee at Martin, said in a statement.
The government paused collections for student loans in March 2020 amid the onset of the COVID-19 pandemic. The pause also included a stop on the accrual of interest on student loans. Now, after four years, the Biden Administration’s final extension on student loan forgiveness is set to expire this month.
Kevin Thompson, finance expert and founder/CEO of 9i Capital Group, said in a statement: “Many borrowers anticipated their student loans would be forgiven or eventually reach a point where they no longer had to make payments. However, with the resumption of repayments, many people find themselves unprepared. This sudden financial obligation could be particularly detrimental for those who had incorporated non-payment into their budgets, making it harder to save for a home or qualify for other types of credit.”
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