New survey shows borrowers are aware, but not financially prepared, for student loan payments to resume
Americans are back to work in a recovering economy, but 89% of full-time employed student loan borrowers say they’re not financially secure enough to begin making payments after Feb 1.
Student Debt Crisis Center (SDCC), the nation’s largest student debt advocacy organization, and Savi, a social impact technology company working to help solve the crisis, recently completed a nationwide survey of 33,703 student loan borrowers. The survey is the fourth installment of the Student Debt x COVID-19 series looking at the impact the pandemic continues to have on student loan borrowers.
In short, borrowers are living through an unprecedented economic time period. Even though over 68% of respondents are fully employed, nine-out-of-ten student loan borrowers are not ready to resume payments in February. Respondents of this survey say that student loan payments will eat a large portion of their income and prevent them from affording other bills like rent, car loans and medicine. These findings are doubly concerning within the context of the nation’s rising inflation and cost of living.
Among fully-employed student loan borrowers, 89% say they are not financially secure enough to resume payments on February 1. One-in-five say (21%) they will never be financially secure enough to resume payments again.
More than half (57%) of borrowers surveyed were notified about payments resuming on February 1 by their loan servicer and one-third (33%) heard this news directly from the Department of Education. These are significant increases compared to the last survey in June that showed only 30% and 22% had heard from their servicer and the Department respectively.
Over a quarter (27%) of respondents say that one-third of their income or more will go toward student loans when payments resume in February. One-in-ten say that half of their income will go toward student loan payments.
88% of respondents say that COVID-19 relief for federal student loans was critical to their financial well-being during the pandemic. 87% say that COVID-19 student loan relief made it possible to afford other bills during the pandemic.
Even as the economy returns, 44% of fully-employed student loan borrowers said they cannot afford their monthly student loan payments or are in loan default.
As the Department of Education continues the rollout of the PSLF waiver, one-third (36%) of 501(c)(3) and nonprofit employees said they were not aware of recent changes to the Public Service Loan Forgiveness program that makes it easier to receive forgiveness.
45% of respondents say their financial wellness is currently poor or very poor while only 25% said that was the case prior to the pandemic.
“Our newest Student Debt x COVID-19 survey proves that student loan borrowers face economic obstacles that are larger and longer-lasting than we imagined. As the economy recovers, even fully-employed student loan borrowers are not financially secure enough to make payments again. Simply put, Americans with student debt aren’t facing an employment crisis, they are facing a student debt crisis,” said Natalia Abrams, President and Founder of Student Debt Crisis Center. “When the payment pause ends on February 1, borrowers will have the rug pulled out from under them as they work to get back on their feet. We are especially concerned that the burden of loan payments will collide with other changes in the economy. Economists warn of rising inflation and costs and our survey finds that many borrowers will see over one-third of their income go to student loans when payments resume.”
“Most borrowers now know that student loan payments are resuming in just a few months, but they are not prepared,” said Aaron Smith, co-founder of Savi. “It will be almost two years since most borrowers last made a student loan payment- that’s billions of dollars in payments each month that will have to restart. This survey shows that many borrowers will feel significant financial strain when payments resume and have benefited from the pause. It is an unprecedented situation and we expect a huge surge of borrowers needing help to manage that return to repayment.”
Borrowers seeking help with their student loan debt can find a list of trusted resources here.
The survey received 33,703 responses from people in all 50 states between November 1 and November 14, 2021. The 44-question survey was distributed via email to a group of Student Debt Crisis Center followers that includes approximately 2 million people. Findings can be broken down by demographic, geographic, occupational and socioeconomic statuses upon request.