#StudentLoans #DebtRelief #FinancialStrain #BidenAdministration #IncomeDrivenRepayment #LoanForgiveness #CreditScores #HigherEducation
A recent report highlights the significant financial challenges facing student loan borrowers, revealing that one in five of them have yet to make any payments on their outstanding loans. According to a survey conducted by Intuit Credit Karma, 20% of borrowers have avoided payments, a figure that increases to 27% among households earning less than $50,000 annually. The survey, published on September 5, underscores the mounting financial pressure, as more than half of the respondents cited an inability to afford their student loan payments, and nearly half reported feeling financially unstable. High living costs were the primary reason for the strain, leading many borrowers to make tough financial decisions such as falling behind on other bills, including auto loans and mortgages, or prioritizing higher-interest debt over student loans.
The report shines a spotlight on the particularly precarious financial situations of younger borrowers, with 44% of Gen Z and 41% of millennial respondents indicating they have depleted their savings to manage their student loan payments. Overall, about a third of the surveyed borrowers reported having zero savings. This financial instability is compounded by the looming end of the federal government’s “on-ramp” grace period, after which borrowers will face traditional consequences for missed payments, such as damaged credit scores and potential wage garnishments. The grace period allows payments to be due and interest to accrue, but missed payments are not considered delinquent or reported to creditors.
The complexity of the situation is exacerbated by the uncertain future of the Biden administration’s income-driven repayment plan, known as the SAVE plan, which is currently blocked by court orders. The SAVE plan aims to reduce monthly payments and provide a clear path to loan forgiveness. While the plan has seen substantial interest, with approximately 7.5 million borrowers signing up and 150,000 already having their debt erased, its implementation remains in legal limbo. Republican state attorneys general have challenged the plan, arguing that the administration lacks the legal authority to proceed and that it contradicts a U.S. Supreme Court decision that struck down an earlier attempt at large-scale student loan cancellation.
Courtney Alev, a consumer financial advocate at Intuit Credit Karma, advises borrowers not to rely solely on the hope of loan forgiveness. Instead, she encourages those struggling to make payments to proactively reach out to their lenders to explore available options. The survey was conducted online between August 3 and August 19 among 1,995 adults in the United States with outstanding student loan debt. As borrowers navigate these uncertain times, the importance of seeking viable financial solutions and staying informed about potential policy changes cannot be overstated.
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