Anna Flores and Higinio Garcia
Photo: Gabriela Alvarez
Do you remember student loan payments?
It’s been nearly a year since the U.S. Department of Education allowed tens of millions of federal loan borrowers to hit the pause button on their bills because the coronavirus pandemic wreaked financial damage.
Around 90% of the eligible borrowers have accepted this offer, according to university expert Mark Kantrowitz.
As a result, life without the monthly bills has become the new normal.
Anna Flores, a consultant at a charter elementary school in Lakeview Terrace, California, hasn’t even signed into her lender’s account since March 2020. That gives her an additional $ 350 a month. She owes nearly $ 100,000.
Between going out less and not having to pay for her student loan, she saved more than $ 12,000. Before the pandemic, she had nothing on the bank. “Not a single dollar,” said the 34-year-old Flores.
She had been engaged since December 2019, but without saving any money, the cost of a wedding felt daunting.
After she and her fiancé built up their savings, they began planning a ceremony.
Finally, in November, she married her husband Higinio Jr. in a small chapel with a garden. Around 20 people were present. They had more than enough to cover the $ 8,000 cost of the wedding.
“The break has worked so much in our favor,” said Flores. “We are allowed to really dream.”
The pair have continued to save aggressively and still have more than $ 4,000 in the bank. They also started investing and paid off much of their credit card debt.
Feeling financially more secure also led them to take a risk and start a bakery business together. Since then, they have been known in their community in the San Fernando Valley for their “Chocoflan”, a mixture of chocolate cake and flan.
“We never thought we would be entrepreneurs,” said Flores.
Anna Flores and Higinio Garcia were able to open a bakery, Mr. H. Chocoflan, partly because of the pause in payments.
Source: Anna Flores
The U.S. has more than 44 million student loan borrowers and the country’s outstanding balance is projected to exceed $ 2 trillion by 2022. The average student loan balance is $ 30,000, up from $ 10,000 in the early 1990s, with many borrowers owing $ 100,000 or more. According to Kantrowitz, the average bill is $ 400 per month. Research has found that these payments make it difficult for people to save for their future, start businesses, and raise families.
The past 12 months have given borrowers a taste of another life.
Ethan Barnhardt, a local government administrator in Columbus, Ohio, has approximately $ 60,000 in student loans. His wife, Elizabeth, a pediatrician, owes more than $ 400,000. Their combined monthly payments were over $ 700.
A year off from those payments has left them on a much stronger financial footing, Barnhardt said.
The couple were able to save more than ever for their retirement. Your emergency savings are now the largest that ever existed.
“It gives you a good feeling of stability,” said 33-year-old Barnhardt.
Ethan and Elizabeth Barnhardt
With the kind permission of the Barnhardt family
When unexpected expenses came up, they withdrew their credit cards. No more. When Elizabeth’s car recently needed new brake pads and tires, they paid the bill in cash.
And for the first time, he and his wife are seriously considering raising a family.
“We both want to have the experience of raising children,” said Barnhardt.
More from Personal Finance:
Rental subsidies of over $ 45 billion may be available. How do I apply?
Timing your tax return properly could mean major stimulus scrutiny
A new relief law could help keep seniors out of nursing homes
On his first day in office, President Joe Biden extended the payment hiatus and interest waiver for federal student loan borrowers to September 30, which means many borrowers may be left without paying their debts for 18 months.
That hiatus was necessary for Leticia Ortiz, who owes around $ 8,000 in student loans. Before the pandemic, 60-year-old Ortiz lost her job as an executive assistant.
Finding new jobs only became more difficult during the public health crisis. She was afraid that she would fall back on her bills, including her mortgage. She owns a one bedroom condominium in Colton, California.
But not having to pay $ 160 a month on her student loan gave her more breathing room. She was able to send some of the extra money to her mortgage lender. She was also able to avoid dipping into her small retirement savings.
To stay positive during these tough times, she focuses on the months she has been without student loan payments instead of worrying about what will happen when the bills resume in the fall.
“Right now it’s just hopeful,” said Ortiz. “It gives me most of this year banned from a job.”