According to the survey, 9 out of 10 student loan borrowers are not ready to start repayments again



The vast majority of nearly 24,000 student loan borrowers examined recently said they were not ready for pandemic suspension of payments ends after September.

A sample of June 17-22 through a 46-question poll emailed to a student debt crisis support group found that 9 out of 10 respondents in all 50 states were not ready to resume payments in October. …

Actions taken by the federal government will will lead to roughly $ 100 billion according to Department of Education (ED) data and expert analysis, total student loan forgiveness is between March 2020 and September 2021.

The study says that “80% of borrowers say they are currently dependent on COVID-19 assistance for federal student loans, and 75% say the suspension of payments is critical to their financial well-being.”

Graduates pose for photographs in Washington Square Park on May 19, 2021 in New York after NYU course opening ceremony took place almost before graduation in 2021 (PHOTO: TIMOTHY A. CLARY / AFP)

Graduates take a photo in Washington Square Park on May 19, 2021 in New York after NYU’s inauguration ceremony took place shortly before graduation in 2021 (PHOTO: TIMOTHY A. CLARY / AFP)

About a third of respondents said that if payments resume on October 1, more than a quarter of their income will go towards paying off student loans. And 32% of borrowers also said their student loan servicing service never contacted them about updates related to the pandemic.

In addition, the study found that color borrowers were “least likely to say they are willing to resume repayments on their federal student loans.”

“Even as the economic recovery accelerates, many Americans are still suffering the economic damage caused by the pandemic,” said Natalia Abrams, executive director of Student Debt Crisis. “We urge the Biden administration to extend the pause in payments and interest on federal student loans to give Americans a chance to get back on their feet when the health crisis dies down and the economic recovery picks up.”

Student Debt Crisis / Savi Report

Student Debt Crisis / Savi Report

“Student loan delayed action”

Advocates and politicians have expressed deep concern about the ability of debtors to pay off their loans after the pause. One of the main problems is a possible surge in delinquencies and default on obligations.

Student loan balances rose $ 29 billion to $ 1.58 trillion in the first quarter. according to the Federal Reserve System of New York… At the same time, only 6.2% of student loans were seriously delinquent or defaulted in the first quarter of 2021 due to suspension of payments and a moratorium on debt collection

If payments are suspended without cancellation in October, “we will face a student loan time bomb that could detonate and throw millions of families off financial ruin,” notes Sen. Elizabeth Warren, Massachusetts. said in may

According to the survey, if the payment gap expires, 17% expect at least one student loan to be delayed in the next six months; 30% said they simply would not be able to pay off student loans. Unsurprisingly, 86% of respondents said they support for student debt write-off

The federal government’s debt collection mechanism will be restarted after a disruption in payments, which means that defaulting borrowers will be able to receive tax refunds or social security payments and see their credit ratings are falling

Democratic MPs including Warren, Senate Majority Leader Chuck Schumer, New York, Congressman Ayanna Pressley (MA-07) and Congressman Joe Courtney (CT-02), sent a letter to President Biden this week urging President Biden to renew suspension of federal student loan payments until at least March 31, 2022.

“The planned resumption of student loan payments in October could seriously hamper our economic recovery,” lawmakers wrote. – Before the pandemic, the average student loan payment was between $ 200 and $ 299 per month – a significant part of the family budget and money that is desperately needed to meet basic needs. “

WASHINGTON DC - FEB 4: Senate Majority Leader Chuck Schumer (NY) speaks during a press conference on student debt outside the US Capitol on February 4, 2021 in Washington, DC.  Also pictured: L.R., Rep. Mondair Jones, New York, Rep. Alma Adams, North Carolina, MP Ilhan Omar, Minnesota, Senator Elizabeth Warren, Massachusetts, and MP House of Representatives Ayanna Pressly (D-MA).  The Democratic group re-submitted its resolution calling on President Joe Biden to take executive action to write off up to $ 50,000 of debt for federal student loan borrowers.  (Photo by Drew Angerer / Getty Images)

Senate Majority Leader Chuck Schumer (New York State) speaks at a press conference on student debt outside the US Capitol on February 4, 2021 in Washington, DC. (Photo by Drew Angerer / Getty Images)

Thursday morning, more than 125 organizations also wrote to the President extend the pause, “until your administration fulfills its promises to student loan borrowers, fix the broken student loan system, and abolish federal student debt.”

Warren, Schumer, and Pressly also called on Biden on multiple occasions. cancel a student loan debt of $ 50,000 immediately by order. $ 50,000 loan forgiveness would take off the entire debt burden of $ 36 million (84%) about 43 million borrowers keep federal debt while a $ 10,000 forgiveness cancels the debt of 15 million of these borrowers (35%).

Call for critical reform

In addition to extending the pause in payments and possibly canceling student debt, there have also been attempts to fix the existing student loan mechanism.

Warren is currently delaying confirmation of Biden’s candidacy for the post of Deputy Secretary of Education (ED), as she insists on the need to reform the existing system, such as taking tough measures against those servicing student loans. Navient and Pennsylvania Higher Education Promotion Agency and increase commercial college oversight

“This is not about canceling, but about managing the student loan program,” a source familiar with the situation told Yahoo Finance. “Warren’s office is in constant negotiations with [ED undersecretary nominee James Kvaal] and a department on a number of necessary reforms in higher education, including the management of the student loan program. “

Extending the pause will also give the ED an opportunity to fully prepare for what will happen next. This will include talking to loan officers about how they deal with debtors to resume payments, which Consumer Financial Protection Bureau candidate Rohit Chopra previously honored

“While the pause in payments and interest payments has brought financial relief to borrowers, many are still looking for reassurance,” Savi co-founder Aaron Smith said in a statement. “We must do everything in our power to make sure that borrowers are informed and fully prepared to resume payments and can return to normal without hindrance.”

Aarti is a correspondent for Yahoo Finance. She can be contacted at Follow her on Twitter @aarthiswami

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