As such, we do not want to include one-time, lump-sum payments on loans in our estimate of households’ routine monthly behavior, and work by other researchers found a surge in such payments beginning in August 2023. Because our question of interest is how well households will fit the re-started payments into their month-to-month budget, we want to estimate households steady-state payment habits. We use February through July 2023 to establish the steady state spending before the end of the payment pause for several reasons. We calculate the projected additional amount households will need to pay after the resumption of student debt payments as the difference between this pre-pandemic baseline amount and the monthly average of payments the household made from February through July 2023. 7, 8 We use the monthly average of the household’s student payments in these pre-pandemic months as their baseline student debt payment, and we assume that households will resume paying this amount once the payment pause ends. We flag households as being involved in student debt repayment if they made student debt payments in at least five of the six months before the start of the pandemic (September 2019 through February 2020). 5 We calculate each household’s average monthly expenses and take-home income from the transactions in these accounts. Second, they must have had a Chase checking account that meets minimum usage requirements to ensure that the household conducts most of its financial activity through these accounts. First, they must have held a Chase-serviced mortgage during the six months spanning February through July 2023. Households are included in our sample if they meet two criteria. Our analysis uses the bank transaction data of 455,000 deidentified households’ personal checking and savings accounts. And while the Biden administration has taken some steps to allow flexibility in how people resume payments, additional monitoring of households’ response to the end of the pause, as well as their financial security, is warranted. 4 Nevertheless, we project budget adjustments will be slightly larger for lower-income households, and these households may have more difficulty making these adjustments. It’s important to note that we would expect a natural decrease in discretionary spending to occur-independently of the payment restart-as households finish spending down the excess savings they accumulated in 20. Many households will need to reduce their other expenses in some way to make their restarted student debt payments without drawing on savings or incurring additional debt. However, these seemingly small figures mask crucial nuances. We estimate that a relatively small portion (15 percent) of mortgage holders in our sample are also expected to restart student debt payments, and among those households, the median payment amount will be roughly 3 percent of take-home income. Overall, we find that the student debt payment restart should have modest effects. Lower-income mortgage holders will need to make larger budget reallocations: in the lowest income quartile, median reallocation is projected to be 4.6 percent of take-home income versus 2.2 percent in the highest income quartile.This means that many households will need to decrease spending or use savings to cover student debt payments. While this 3 percent increase is relatively modest, we project that, given recent levels of spending and other expenses, the median household with both student debt and mortgage obligations will have a budget shortfall of 0.8 percent of take-home income once they start making full student debt payments.Among these joint mortgage–student debt payers, the median household will need to use roughly 3 percent of their take-home income for student debt payments once they resume.15 percent of mortgage holders in our sample had been making regular student debt payments before the pandemic.Our analysis suggests that budget reallocations will be modest for most households, but many may need to decrease their other expenses to cover their student debt payments. Our key findings are: This report sheds light on the possible spending adjustments these households will need to make in the face of their restarted student loan payments. We use de-identified administrative banking data from Chase checking and savings accounts to measure households’ income and expenses, and we project how much a household’s student loan payments will increase in coming months based on their student loan payments right before the pandemic.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |