Student loan borrowers are staring at the prospect of defaulting on their loans as 89% of them aren’t financially solvent to begin repaying their loans starting February 1 next year. That is the date when student loan borrowers will lose the relief they had since the beginning of the pandemic. They will thus be thrown back into repayment mode, whether they’re ready or not.
Most loan borrowers are nowhere near capable of starting to pay off their loans. The startling results released by the Student Debt Crisis Center along with the social impact technology startup, Savi, found that 89% of loan borrowers say they are not financially strong enough to resume payments, though they are fully employed.
A fifth (around 20%) of the respondents have said that they will not be financially strong enough to restart the payment of student loans. More than a quarter of the respondents (27%) say that they would have to pay at least a third (33%) of their earnings towards student loans as loan payments start on the given date.
10% of loan borrowers respondents say that around half their income would go towards repayment of loans. 44% of respondents said that they are not in a position to repay their student loan installments or have already defaulted on their loans.
Many Students Not Aware Of Provision For Student Loan Forgiveness
45% of the respondents have stated that they are financially weak, and this figure has risen from 25% of the respondents before the pandemic struck.
Even though the economy is recovering, even students who are not employed full time aren’t financially sound to begin repaying loan installments. It indicates that though student loan borrowers are not facing any employment crisis, a student debt crisis threatens to upset their financial plans.
Many students are still not aware of the changes in loan forgiveness opportunities for students. This measure announced by the Biden administration makes it convenient to cancel loans. President Biden has already canceled repayment of various student loans worth $11.5B.
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