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Employees Brace for Retirement Savings Hit as Student Loan Payments Resume
After a more than three-year pause, federal student loan borrowers are gearing up to resume repayments on Oct. 1, a halt initially imposed due to the COVID-19 pandemic. The impending resumption is stirring concerns among many Americans already strained by inflation and surging interest rates. Corebridge’s survey of over 2,100 federal student loan borrowers sheds light on the prospective implications on retirement savings, personal finances, and overall financial stability.
Analyzing the Financial Impact
75% of borrowers are apprehensive that resuming student loan repayments will hinder their ability to save for retirement. To adjust to the repayments starting in October, many borrowers expect to curtail their overall savings by 29%, diminish their emergency funds equivalently, and decrease retirement savings by 22%.
Women Experience Intensified Financial Vulnerability
For women, the financial future seems particularly uncertain, with 60% of female borrowers unsure about managing the forthcoming payments in October. Disparities were also apparent during the repayment break, with only 5% of female borrowers allocating their disposable income from paused payments towards retirement, compared to 16% of their male counterparts.
Strain Amplified for Lower Income Earners
Borrowers earning less than $50,000 annually are set to bear the brunt of the repercussions. Within this group, 77% mentioned that the upcoming payments would be detrimental to their retirement savings, 67% doubted their ability to afford the repayments, and 53% anticipated missing one or more payments. Disturbingly, 38% foresee a potential loan default.
Imminent Lifestyle and Financial Adjustments
In preparation for the repayment resumption, 50% of borrowers are preparing to slash spending on non-essentials like entertainment. A substantial 41% are contemplating seeking additional employment or increasing their working hours, and 37% expect to cut back on spending on essentials such as groceries.
Survey Methodology
This inquiry was facilitated in association with Morning Consult between Aug. 16-24, 2023, involving a diverse national sample of 2,112 adults possessing federal student loans. With a margin of error of +/- 2 percentage points, the findings have been weighted to reflect the demographic of Americans aged 18 and over with student loan debt.
Conclusion
Corebridge’s findings reveal a stark reality for federal student loan borrowers who brace for repayment resumption. The looming financial reshuffling, involving modifications in saving and spending habits, and the notable financial pressures on women and those with incomes below $50,000, showcases the extensive societal and economic ramifications. These individual recalibrations signify broader economic implications, underscoring the urgency for comprehensive support mechanisms and interventions to facilitate this transitional phase.