9 in 10 student loan borrowers aren’t ready to begin payments again, according to a survey. Yahoo Finance’s Aarthi Swaminathan shares the details.

Video Transcript

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AKIKO FUJITA: Well, the pandemic pause on student loans is set to expire in just a few months. But an overwhelming majority of borrowers say they are not ready to begin payments yet, at least according to a new survey.

Let's bring in Yahoo Finance's Aarthi Swaminathan, who's covering the space for us. And Aarthi, how much of this is about students sort of not being able to pay up because the unemployment benefits are also expiring? What are some of the biggest challenges right now when you look at repayments starting in September?

AARTHI SWAMINATHAN: Yeah, it's kind of a confluence of two things, right? The payment pause expiring and also the unemployment benefits expiring. But this study was really interesting, 24,000 borrowers were surveyed by this group, Student Debt Crisis and Savvy. And they found that 9 in 10 basically were not prepared to make payments. And that is perhaps due to the employment situation, due to their financial situation, and due to the fact that they just simply reallocated the money elsewhere and are now finding it very hard to reallocate it back.

But it's interesting because one third-- one third of them said that student loan payments form a quarter of the income. That's really big. And also, 17% said that six months after the payment resumes, they would be in default. Sorry, I'm just a little bit shocked because delinquencies have gone to such a low rate. And to see it spike back up like that, that's going to have huge implications for the borrower and also for the government who is holding all these loans.

ZACK GUZMAN: Yeah, and I mean, you think about it, 75% saying the payment pause was critical to their financial well-being, you turn that back off, you get back to payments, it's going to be a bit of a shock if you got used to it. But I mean, it's not just federal loans we're talking about here, Aarthi.

What do we think about the private side and how important that is when you think about the sizes of student debt in both federal loans and private loans?

AARTHI SWAMINATHAN: Private loans have been-- really, it's a sad story, to be honest. Because they haven't been enjoying this payment pause at all. Some private loans, which are federally-backed, you know, there's some nuances that they have enjoyed the payment pause. But private student loan borrowers have largely been left out of it.

But I do want to mention on back to the payment pause, it's interesting to see where this services have communicated to borrowers saying, look, your payments are coming back on. And the fact is, they haven't. They haven't sent an email. They haven't sent any texts. Because they don't know if the government is extending the policy.

And we just heard from Secretary Cardona, Miguel Cardona, who is basically in charge of this whole thing, that he's still having conversations about it. He still hasn't made a decision.

So with all this confusion and now with consumers going-- I'm spending the money on something else, I don't want to-- 9 in 10 don't think they can pay it back-- it's going to be a real challenge. It's also really pressing that they [INAUDIBLE] as soon as possible before, again, defaults and delinquencies start to rise.

AKIKO FUJITA: Yeah, the clock certainly ticking on those restarts, resuming in September. Aarthi, staying on top of that story for us. Thanks so much.