Thanks to people locking in historically low mortgage rates during the pandemic, many US borrowers will pay more on their student loans than their mortgage after a three-year pandemic-era student loan pause ends next month, Bloomberg reports.
28-year-old Kentucky physical therapist Fikret Sabic, for example, will have to start making student loan payments of $1,130 per month to satisfy the student loan obligation. This is nearly $300 more than he and his wife Emina are paying on their mortgage.
In total, Sabic is carrying around $94,000 in student debt from his undergraduate biology degree and doctorate of physical therapy, both from Western Kentucky University.
The pandemic pause on student loan payments helped the couple buy a home in 2020 for $207,000 with a 3.25% interest rate, less than half what borrowing costs are now. Sabic knew debt payments would restart at some point, and he and Emina have been preparing their budget, but they still expect it to be difficult. -Bloomberg
"It really does slow down a lot of your life decisions when you have such a big burden monthly to have to pay," said Sabic, who agreed to said burden and then bought a house. That said, borrowers can be cut a little slack when factoring in crippling inflation thanks to 'Bidenomics.'
As Americans face the resumption of student loan payments, many will be cutting back on spending to make ends meet. Experts are predicting a wave of delinquencies hitting credit card, auto loans and student debt payments as people struggle to make ends meet.
While the average student loan payment before the pandemic was about $400, one in five borrowers will be paying more than $500 a month. Almost 7% of debt holders face bills of $1,000 or more. At the same time, about 23.7 million homes in the US have a mortgage payment of $1,000 or less, according to Black Knight. -Bloomberg
In Bloomberg's second example, Lexington, South Carolina attorney Chase Keibler and his wife Laura face $2,100 per month student loan payments next month - vs. just $1,850 for their mortgage. Chase has $75,000 in federal debt which he used to obtain an undergraduate degree in English from Indiana University of Pennsylvania, and his law degree from the University of South Carolina. Laura has around $70,000 of debt, which is a mixture of public and private debt.
In July 2020, the couple paid $346,000 and locked in a 3.2% mortgage rate.
Now, they say the addition of their student loan obligations feels "daunting," especially now that they've got two children under the age of two and Laura now a stay-at-home mom.
"I expected to have law school debt, but it’s an incredible amount of money that is guaranteed out every month for the foreseeable future," said Keibler, who also signed on the dotted line and then bought a house and had two kids and agreed that his wife would leave the workforce to raise their children.
More than rent too?
It's not just homeowners - renters are about to feel the pain too. Bloomberg highlights the plight of one Molly McGhee, a 28-year-old novelist living in New York, whose student loan bill will exceed her rent.
The 28-year-old novelist has $120,000 in public and private loans from her undergrad degree at Champlain College in Vermont and her MFA in writing at Columbia, where she also works as an adjunct professor. She will soon pay $1,270 a month on her debt. That’s more than her $1,100 share of the $2,500 rent for an apartment in Crown Heights, Brooklyn, where she lives with her partner.
McGhee said she needed to get an MFA to be taken seriously in her field, but her paychecks haven’t made up for that investment. She and her partner are putting off goals like getting married because of the loans. -Bloomberg
"I’m finding myself at a juncture where I’m really considering having to move back home to Tennessee and get an office job somewhere where the cost of living is way less," she said.
Would could imagine that taking on $120k of debt wouldn't be tenable on a budding novelist's salary in NYC.