The Department of Education has cancelled nearly $3 billion of student loans for more than 130,000 student loan borrowers, but thousands of other student loan borrowers are in danger of defaulting if payment resume later this year.
A national survey of nearly 23,000 student loan borrowers in all 50 states from June 17 to June 22, 2021 found that nine in ten federal student loan borrowers say they are not ready to continue payments on October 1.
Nationally, 80% 0f borrowers surveyed said they currently depend on a pandemic relief program that pauses federal student loan payment requirements, and 75% say that the payment pause is critical to their financial wellbeing.
Nearly one-third of those surveyed said more than a quarter of their income will go to student loans if payments resume on October 1 as scheduled. Only 26% of borrowers rated their financial wellness as “poor” or “very poor” before the pandemic began in March 2020, but that that number had increased to 43% by June 2021.
The survey by Student Debt Crisis, the nation’s largest student debt advocacy organization, and Savi, a social impact technology company, found that while short-term federal relief was critical to borrowers, most are facing long-term challenges that will remain for months or years to come.
“A large majority of respondents say they are not ready to resume student loan payments in October when relief is set to end,” said Natalia Abrams, executive director of Student Debt Crisis. “Findings show that most people still depend on pandemic relief for student loans. It is even more important for Black and brown borrowers, women, and other groups that the economic recovery has not yet reached.”
In Nevada, which suffered one of the highest unemployment rates in the country, about 58 percent of respondents said they have either defaulted on a student loan or are not able to make monthly student loan payments and believe they will be in the same position 6 months from now.
Following national trends, about 82% of Nevada borrowers said that the payment pause is critical to their financial wellbeing. Another 78% said they currently depend on Covid-19 relief for federal student loans.
Nearly one in nine Nevadans surveyed said the payment pause made them more likely to support student debt cancellation.
Half of Nevadans surveyed, however, said they are more optimistic about their student loan situation under the Biden administration.
Several Democratic lawmakers have urged an extension of the payment pause on student loans. Massachusetts Sens. Elizabeth Warren and Ed Markey wrote to the White House on July 13 to “urge you to extend the current pause on payments and interest until at least March 31, 2022.”
In the past decade, student loan debt has doubled, according to data from the Federal Reserve, growing from $855 million in collective debt to $1.7 trillion.
Enrollment in income-driven repayment plans — a monthly payment plan based on income — continued to grow during the pandemic despite the payment pause, according to a June report released by the U.S. Department of Education. As of March 2021, 8.3 million Direct Loan borrowers were enrolled in income-driven repayment plans, up 3% from March 2020.
Still, according to an analysis by Savi, only about one-third of student loan borrowers are currently enrolled in an income-driven repayment plan, signaling a potential wave of student loan defaults when the pandemic payment pause expires.
“While the payment and interest pause has provided financial relief to borrowers, many are still looking for certainty. We need to do everything in our power to make sure that borrowers are informed and fully prepared for the resumption of payments and can seamlessly get back on track,” said Aaron Smith, co-founder of Savi.
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