This post was originally published on this site
About 70% of student-loan borrowers who were making regular payments before the COVID-19 pandemic now expect they’ll manage to make their payments in full after the end of an ongoing pause for repayments.
That’s according to a Federal Reserve Bank of Philadelphia survey that was released Friday and conducted in January and April.
Among this group, 20% reported that “their scheduled payments were currently unaffordable, indicating that there is scope for increased enrollment in one of the available income-driven repayment plans offered by the federal government,” the regional Fed bank’s researchers wrote in a report on the survey.
“Beyond this group of borrowers, however, continued blanket forbearance extensions are costly and benefit the majority of borrowers who neither expect to struggle with their payments when the payment pause ends nor appear to be shoring up their savings or paying off other debts.”
The report on the survey, which involved 13,423 consumers, comes after President Joe Biden in early April announced that a moratorium for student-loan repayments, which had been scheduled to end May 1, now will run through Aug. 31. Analysts have cast the move as a midterm-elections gambit and predicted he’ll do it again before voters head to the polls on Nov. 8.
Biden then in late April made headlines by saying he’ll roll out a plan for canceling federal student loans “in the next couple of weeks” — and that he’ll aim to forgive less than $50,000 in debt per borrower. White House press secretary Jen Psaki told reporters on Thursday that she didn’t have any updates on a final decision on debt cancellation, saying Biden is “continuing to consider a range of options.”
Related: Here’s how Biden could move to cancel student loans
The Philly Fed’s researchers wrote that more than one-fifth of borrowers in their data are “chronically struggling and would benefit from more comprehensive solutions than extending a temporary forbearance.”
“In other words, for some borrowers, additional forbearance extensions are simply postponing a day of reckoning with loan payments that are unaffordable. Our data show that a more effective and equitable solution would be to design and implement a thoughtful set of policies that address the different root causes of those payment challenges,” they said.
The Philly Fed survey found that most respondents without student loans preferred no, or relatively limited, cancellation of federal educational debt, such as $10,000 per borrower or less.
“In comparison, those with education debt overwhelmingly (86%) preferred some debt relief, but even among this group, there did not appear to be widespread support for cancellation of most or all education debt,” the regional bank’s researchers wrote.
Biden has long supported canceling up to $10,000 per borrower, and multiple published reports have said he’s considering forgiveness of at least $10,000 per borrower via executive action.
The Philly Fed researchers noted that there has been “limited research on student borrower financial health during the pandemic” as well as on other topics such as debtors’ “expectations of successful loan payments once forbearance expires.”
Opinion: Our student-loan system needs fixing — and this change would be smarter than just forgiving debt
