In March 2020, the student loan forgiveness program was initiated, providing relief to many borrowers. However, in October 2023, loan payments resumed, presenting new financial challenges. While the temporary pause was beneficial, it left numerous individuals still grappling with the task of managing their additional financial obligations. Borrowers now confront the daunting prospect of resuming loan payments alongside recurring bills and debts.
Rising Credit Card Debt and Interest Rate Impact
Since early 2022, the Federal Reserve has raised interest rates 11 times, impacting both student loans and credit cards. Credit card interest rates have hit a record-high average of 22%. In the second quarter of 2023, the average credit card balance soared to a 15-year peak. The cessation of COVID-19 stimulus funds, coupled with credit score inflation, contributed to this surge. Delinquencies are on the rise, particularly among subprime borrowers.
Financial Institutions Face Uncertainties
Banks are contending with the repercussions of higher interest rates and inflation, resulting in increased loan costs. They are implementing cost-cutting measures, staff layoffs, and adjustments to loan loss reserves to cope with the prevailing uncertainties.
See also: Lessons Learned From the Fourth United States Bank Failure of 2023
How Perficient Ensures Business Sustainability
During these challenging times, our financial services team specializes in streamlining operations to reduce expenses. We excel in low-cost digital collections engagement and boast a proven track record of driving efficiency improvements that enable firms to reallocate up to 30% of their collections staff to other areas, thereby reducing losses.
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