What pause? Student loan payments are already pouring in before October start -- here's the catch

There’s signs some people aren’t waiting to receive a federal student loan bill in October to start paying down their debt.

Education Department monthly deposits have averaged $1.2 billion during the last 12 months. August’s deposit surpassed $6 billion, the note said. Deposits were over $600 million each day in the last three days of the month, researchers said. Bank of America researchers say the uptick likely includes payments to beat the start of interest — but loan refinances on larger amounts “by some borrowers seems more likely than a large number of borrowers making a monthly payment, in our view.”

There’s approximately 40 million federal student loan borrowers who owe $1.7 trillion in debt. Payments are resuming without mass loan forgiveness after the Supreme Court blocked the Biden administration’s debt cancellation plan. In the wake of the court’s ruling, the President also announced a new repayment plan aimed at making student loan bills more manageable. Around 4 million people have signed up for the new income-drive repayment plan, called SAVE, that will shield more money from the calculations on monthly payments, administration officials said Tuesday.

Polls indicate problems ahead. Nearly half of borrowers, 45%, expect they will fall behind on payments, according to an August poll from Credit Karma INTU, +0.85%. More than half of these borrowers say it’s already difficult to pay other bills, according to the survey from the website helping users look for financial products based on their credit data.

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