Student loan borrowers face difficulties as payment pause ends.

Student loan borrowers face difficulties as payment pause ends.

Student Loan Borrowers Expected to Struggle as Forbearance Ends

As the federal student loan payment pause that went into effect in 2020 comes to an end in October, a new study reveals that many borrowers are expected to face challenges in making their loan payments. Conducted by The Harris Poll on behalf of Intuit Credit Karma, the study surveyed 2,059 adults, including 394 individuals with federal student loan debt. The findings paint a grim picture for borrowers who are already struggling with their finances.

According to the study, a significant number of borrowers will have to choose between making their monthly student loan payments or meeting basic necessities such as rent and groceries. Among federal student loan borrowers, 56% stated that they cannot afford both. This percentage rises to a staggering 68% for borrowers with annual incomes of $50,000 or less. This financial conundrum faced by borrowers is compounded by the fact that U.S. credit card debt is currently at an all-time high.

The study further indicates that 45% of borrowers anticipate their loans becoming delinquent once the forbearance ends. For those with annual incomes of $50,000 or less, this number climbs to 53%. These statistics highlight the potential for financial distress and default among borrowers when confronted with the resumption of their student loan payments.

However, the struggles of student loan borrowers are not limited to future anxieties. The study reveals that 53% of borrowers are already grappling with paying bills, such as auto loans, mortgages, and credit cards, even without the burden of student loan payments. This current financial strain underscores the pressing need for relief measures and strategies to help borrowers manage their debt effectively.

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The survey also solicited opinions on the value of higher education in the United States. Surprisingly, 44% of borrowers expressed doubts about the return on investment for their education. Furthermore, more than half of the respondents revealed that the prospect of resuming loan payments negatively impacts their mental health.

Given the challenges that student loan borrowers are likely to face when repayments resume, financial advocates, such as Courtney Alev from Credit Karma, offer practical advice. Alev suggests that borrowers review their cash flow over the past few months to assess if they have any surplus funds that can be allocated towards their loan payments. If this is not the case, they should explore areas where they can reduce their spending. Additionally, borrowers can visit studentaid.gov to learn about income-driven repayment (IDR) plans and the Department of Education’s newest SAVE plan, both of which can potentially lower monthly payments.

The findings of this study indicate the urgent need for widespread reform and support mechanisms to ease the burden on student loan borrowers. As the October deadline approaches, attention needs to be directed towards finding sustainable solutions that safeguard the financial well-being of borrowers without compromising their ability to meet essential needs.

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• How to Prepare to Start Paying Student Loans Again
• Biden Administration Launches New Student Loan Repayment Plan
• States With the Highest, Lowest Student Loan Debt Burdens

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