New York (Trends Wide) — Millions of Americans are about to get their monthly budget hit hard: federal Student Loan payments come back.

Although the Supreme Court blocked the student Loan forgiveness program promoted by Biden on Friday, the pause in payments is independent and ends as part of the agreement on the debt ceiling.

The borrowers have had a three-year hiatus on their obligations due to the covid-19 pandemic. This has allowed them to use the money to pay the rent or the car, pay off other debts, accumulate savings or spend it.

But starting in September, interest on outstanding balances begins to accrue again. And on October 1, minimum payments resume.

That means 44 million Americans will have to shell out an average monthly payment of between $210 and $314, according to Wells Fargo.

how we got here

The payment pause began in March 2020 as a response to then-President Donald Trump’s covid-19 pandemic, and was extended under the presidency of Joe Biden.

“Loan payments covering 44 million students will have to resume, taking roughly $70 billion a year out of the economy,” said Greg Valliere, chief US policy strategist at AGF Investments.

The return of monthly loan payments is “potentially a negative for discretionary spending,” he wrote in a note to clients, adding that it represents a possible setback on the horizon for an economy doing well, fueled by strong consumer spending. consumers after the pandemic. To the surprise of many economic watchers, US gross domestic product for the first quarter came in at a significant 2%, stronger than initial forecasts, largely driven by consumer spending.

Impact on the economy

“The struggle will be real and unknown after more than three years without making payments,” the Wells Fargo economists wrote. “It is likely that we will see some slowdown in spending growth towards the end of this year as the resumption of payments reduces the consumption capacity of certain households, but we do not believe that the end of the payment pause will be widespread enough. enough to have a significant effect on overall US household spending.

Economists argue that most student loan balances are manageable, saying only people with very high balances will need to cut back on spending.

“We view student loan debt as an increasing burden on American households, but the data shows that large balances (and therefore payments) are concentrated in a relatively small number of households.”

In the first quarter, more than half of all borrowers had loans of $20,000 or less, according to the economists. About 7% of borrowers, about three million people, have balances of $100,000 or more. These households are likely to have to reduce their spending.