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90% of federal student borrowers say they’re not ready to pay student loans starting October 1.
Here’s what you need to know.
A new survey of 23,845 federal student loan borrowers shows that 90% aren’t prepared to pay student loans when Covid-19 pandemic student loan relief ends on September 30, 2021. Student Debt Crisis, the nation’s largest student loan debt advocacy organization, conducted the survey and is advocating for President Joe Biden to extend student loan relief in the wake of the Covid-19 pandemic. According to the survey:
- No Student Loan Payments: 90% student loan borrowers aren’t ready to begin student loan payments again on October 1, 2021.
- Delay Until September 2022: 65% of student loan borrowers say they’re not ready to make student loan payments payments until September 2022 or don’t know when they’ll be ready.
- Covid-19 Stimulus: 80% of student loan borrowers say they currently depend on Covid-19 relief for federal student loans.
- Student Loan Payment Pause: 75% of student loan borrowers say that the payment pause is essential to their “financial wellbeing.”
- Student Loan Payments: Almosgt 33% of student loan borrowers say that more than a quarter of their income will go toward student loan repayment if student loan payments are due starting October 1.
- Financial Stress: Before the Covid-19 pandemic, 26% of student loan borrowers rates their financial wellness as “poor” or “very poor.” Today, that number is 43%.
According to the survey findings, the Covid-19 pandemic is also a story of racial disparity, especially with respect to student loans: “Black, Latinx, and Native people with student loan debt faced large economic obstacles during the pandemic and are least likely to say they are ready to resume payments on their federal student loans…94% of Black borrowers do not feel financially secure enough to resume federal student loan payments in October 2021…45% of Latinx borrowers rate their current financial wellness as poor or very poor, compared to 28% who rated their wellness the same before the pandemic.”
MORE FOR YOU
While Biden has now cancelled $3 billion of student loans since becoming president, there’s no guarantee that Biden will extend temporary student loan forbearance. Under the Cares Act — the $2.2 trillion stimulus package — Congress provided for several types of student loan relief through September 30, 2020:
- pause of federal student loan payments;
- temporarily setting interest rates to 0% on federal student loans; and
- halting collection of federal student loan debt in default.
President Donald Trump extended this student relief for four months through January 31, 2021. Then, Biden extended this student loan relief eight months through September 30, 2021. Biden also extended student loan relief to 1.1 million student loan borrowers with FFELP Loans who were not included in the Cares Act. Through September 30, 2021, the U.S. Department of Education estimates that as a result of this student loan relief, student loan borrowers will get more than $90 billion of student loan cancellation during the Covid-19 pandemic.
This week, more than 60 U.S. senators wrote Biden to extend student loan relief beyond September 30. Preferably, they urge Biden to extend student loan relief to at least March 2022. They say that least 4 bad things will happen if student loans are not paused and student loan borrowers must start making student loan payments on October 1. In addition to ongoing financial distress due to the Covid-19 pandemic, the senators say that student loan servicers — who they say failed student loan borrowers during the Covid-19 pandemic — are ill-prepared to process student loan payments and enroll borrowers in income-driven repayment plans. U.S. Secretary of Education Miguel Cardona said in testimony in Congress last week that discussions regarding a possible extension of student loan relief are ongoing.
If you have student loans, make sure you have a game plan for your student loans. Student loans may not get paused and there may not be student loan cancellation. Here are some smart options to consider to save money:
