Student loan borrowers with jobs are unwilling to pay off their debts

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  • A new survey by the Student Debt Crisis Center found that 89% of full-time borrowers are not financially secure enough to resume payments.
  • Almost a third of these borrowers will spend a third of their income paying off their debts in the next year.
  • This means that borrowers are becoming even scarcer as prices continue to rise across the country.

On February 1, 2022, student loan borrowers will be relieved and set back for repayment since the start of the pandemic – whether they are ready or not.

And most are not.

The Student Debt Crisis Center, in partnership with Savi – a technology startup with a social impact – released the results of the fourth edition of the Student Debt x COVID-19 series on Wednesday, which examines the impact of the pandemic on student loan borrowers. It found that student-credit communications to borrowers has improved since June, but 89% of full-time borrowers say they don’t feel financially secure enough to resume payments in a few months.

One in five respondents said they will never feel financially secure enough to resume their student loan payments.

“What we saw this time around is that student loan borrowers are being notified of higher rates by their loan service provider and the Department of Education, and that student loan borrowers are actually being employed at very high rates,” Cody Hounanian, executive director of the Student Debt Crisis Center, told Insider. “And despite this good news, nine out of ten borrowers say they won’t be ready to resume their payments on February 1.”

Hounanian added that 27% of respondents said a third of their income goes towards monthly payments even though these borrowers are fully employed, and one in ten respondents said half of their income is used directly towards paying off their college debts .

“When we think of that huge chunk of their income going towards student loans at a time when the nation is talking about rising inflation and higher costs, it is a recipe for financial disaster,” said Hounanian.

Aaron Smith, co-founder of Savi, told Insider that the median income of full-time borrowers in the survey is about $ 63,000 and “the idea that over 10% versus a third of their income could be used on their student loans” is one good explanation for why they feel this financial fear. ”

Other key results from the 33,000 survey responses are:

  • 88% of respondents said stopping payments during the pandemic was critical to their financial well-being during the pandemic.
  • 87% said the relief allowed them to pay for other bills during the pandemic;
  • 44% of full-time borrowers said they are behind on their debts or cannot afford payments;
  • And 45% of respondents said their financial health is currently bad or very bad.

The student loan payment hiatus gave borrowers an opportunity to distract themselves from their debt burdens and use their earnings for basic necessities and bills. For example, one borrower previously told Insider that the pandemic hiatus allowed her to pay her medical bills in full for the birth of a baby, and many others have reported extreme anxiety that comes with paying back payments in just a few months.

“The resumption of payments is making me very anxious because I have to somehow find that extra $ 200,” Gwen Carney, a single grandmother with $ 75,000 in student debt, told Insider. “I just don’t have it.”

Even after the pandemic payment hiatus, millions of borrowers are not doing any better

Insider reported Tuesday that, based on new data from the Department of Education, of the 7.7 million borrowers who defaulted on their loans at the start of the pandemic, 93% are still 93% of them.

The department is reportedly considering creating a “safety net” for borrowers once payments resume. One of them could be the automatic deletion of defaulted payments for 7 million borrowers and a “restart”. However, details of these plans are yet to be finalized so borrowers have minimal information about what to expect on February 1st.

“It is very clear that student loan borrowers are unwilling to resume payments,” said Hounanian. “So we really urge the Department of Education to come up with some guidance, to be clear about the options for student loan borrowers, and to ensure that the process that student loan borrowers will go through is clearly identified as soon as possible.”

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