For over three years, no interest has accrued on federal student loans and no payments were required. Soon, mandatory payments will resume, leaving workers with less money in the bank.
Pictured: Graduation cap on $100 bills/iStock, Brian A. Jackson
On June 30, the U.S. Supreme Court released a decision striking down a plan proposed by the Biden Administration to forgive up to $20,000 in federal student loan debt per borrower.
After more than three years during which no interest accrued on federal student loans and no payments were required due to the COVID-19 pandemic, interest is set to resume on Sept. 1, and mandatory payments will resume the following month—and barring further changes, borrowers will now be responsible for repaying their full balances.
Many biopharma workers will be affected by the end of the payment pause and the fall of the plan for permanent student loan relief. According to a report published by the Department of Education, 58.7% of people who graduated with bachelor’s degrees in the natural sciences or mathematics in 2015–2016 had student loans, with an average balance of $23,500.
Among newly-minted Ph.D.s in the biological and biomedical sciences in 2021, a National Science Foundation survey found that 38% had education-related debt of some kind, with a median total of $30,000. These figures are slightly lower than the 39.6% of Ph.D. graduates with education-related debt with a median total of $40,000.
The end of the pause, particularly coming on the heels of a pandemic, is unprecedented; its effects on workers, the labor market, and the life sciences industry, in particular, are impossible to predict. But economists have looked at the effects of student debt more broadly.
Cecilia Rouse, a professor of economics and public affairs at Princeton University who recently served as the chair of the Council of Economic Advisors for two years under President Biden, said one finding has been that “on average, student loans are a pretty good investment . . . economists that have done the calculations have shown that it’s a better investment than many others one might make.”
That finding holds so long as students didn’t take out overly large loans and had good information when deciding to take on debt, she noted.
Good investment or not, economists have also found that having student debt can affect people’s life decisions, including decisions around employment. In a 2011 study, for example, Rouse and coauthor Jesse Rothstein compared the behavior of cohorts of students who attended a university that adopted a policy of replacing what before would have been the loan component of student aid packages with grants.
“What we found is some suggestion that, especially when it came to looking at choices in the public sector, [having student loans] did affect what graduates were thinking about doing right after college,” Rouse said. That is, compared with students who attended before the change, those who attended afterward were more likely to take on lower-paying jobs in the public sector, although this wasn’t a large effect, she added.
Looking forward, Rouse said, “Will the [end of the] pause cause people to seek a higher paying job? Possibly a bit on the margin, but people are doing very well in this labor market right now,” so the resumed payments may not make a big difference.
Another question for economists to study, she said, is whether the restarted payments affect workforce participation—whether people with loans who aren’t currently working or seeking a job will do so to make their payments.
