Here’s what student borrowers think about student loan forgiveness – and it’s not what you expect.
Here’s what you need to know.
A new report from the Federal Reserve Bank of Philadelphia shows what student borrowers think about student loan forgiveness, student loan relief, student loan forbearance and student loan forgiveness. According to the national survey:
- No cancellation of most student debt: Among current student borrowers were do not support for the cancellation of most or all student loans.
- Targeted student loan relief: Most respondents – with or without student loan debt – said any student loan forgiveness should be target.
- Cancel certain student loans: 86% of student borrowers said there should be at least one large-scale student loan forgiveness.
- Limited student loan relief: A majority of respondents without a student loan preferred that there be no or relatively limited federal student loan forgiveness (eg, $10,000 or less per borrower).
- Long-term solutions needed: Over 20% of student borrowers are “chronically struggling” with student loans and need more permanent financial assistance than a temporary student loan payment break.
- Student loan forbearance may not help: Another extension of student loan forbearance will not help these financially vulnerable student borrowers. Most of these borrowers were making partial or no repayments before the Covid-19 pandemic.
Student loan forgiveness: what it means for your student loans
There are several takeaways from this report, which includes a national sample of 13,423 consumers. These results, although there is only one investigation, could influence President Joe Biden as he considers the cancellation of student loans for millions of student borrowers. First, most student borrowers are not in favor of canceling all or most student loans. Progressive Democrats in Congress have supported full student loan forgiveness or at least up to $50,000 in student loans. However, Biden has said he will not forgive most student loan debt. Second, respondents said they preferred student loan forgiveness to be targeted at specific student borrowers rather than most or all student borrowers. Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) have focused on large-scale student loan forgiveness. Since becoming president, Biden has forgiven more than $17 billion in student loans. Biden has targeted the student loan forgiveness to specific student borrowers who, for example, work in public service, have a permanent disability, or have been misled by their college or university. Third, more than 20% of student borrowers experience financial difficulties. These borrowers face chronic financial difficulties and need a fresh start for their student loans. Any potential student loan forgiveness could help these student borrowers, in particular. (Student Loan Forgiveness: 5 Key Takeaways from a Major Announcement).
Student loans: what’s next?
Biden said he could announce a decision on student loan forgiveness within weeks. However, there is no guarantee that Biden will forgive student loans or who will be eligible for student loan forgiveness. For example, Biden could limit student loan forgiveness to federal student loans or student loans only. Biden could also exclude people with higher incomes. Earlier this month, for example, the Biden administration set an income threshold of $125,000 a year. That said, Biden could lower that income threshold to $75,000 if he chooses to match the income requirements for stimulus checks in response to the Covid-19 pandemic. If Biden proceeds with at least one student loan cancellation, he could end student loan relief on August 31, 2022. Make sure you’re ready. Here are some popular strategies for saving money on your student loans: