I wasn't aware that, in part because of pandemic relief legislation, only about 1% of student loans are currently being repaid. That's supposed to change in October - but how many borrowers can afford to resume payments?
In the 2020 CARES Act, Congress gave student-loan borrowers a temporary break from repaying their loans. President Trump extended that twice and President Biden once, with loan payments now set to resume Oct. 1, 2021.
Borrowers could have kept paying if they wanted to, but almost nobody did. As Tom Lee of the American Action Forum recently explained, the portion of borrowers repaying their student loans dropped from 46% at the beginning of 2020 to 1% today. The portion of borrowers in forbearance rose from 10% to 57%. The rest include borrowers who are still in school, who have gotten deferments or who have defaulted.
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America’s $1.4 trillion in federally backed student debt has become a cultural and generational flashpoint as politicians debate what, if anything, to do about it. Liberal Democrats feel some or all of the 40 million student-loan borrowers deserve relief, since the average amount owed per borrower has exploded to nearly $37,000. The growth in average balances has far exceeded inflation or income growth. The hardest cases are students who take on debt but never get a degree or the extra earning power that comes with it.
The economic case for canceling student debt is extremely weak, however. It would be a massive handout to a subset of Americans with better economic prospects than others, with no similar benefit for those worse off or those who already paid what they owe. "It would be a terrible thing to do,” says Sandy Baum, a senior fellow at the Urban Institute. “Making those handouts and excluding the people who have never been to college is totally inequitable. What about people who start borrowing tomorrow? Are we going to forgive debt every few years?”
There's more at the link.
I'm from an old-fashioned school. I completed every one of my university qualifications through part-time and/or distance learning, paying my way every year and never carrying any student loan debt. I ended up with four of them, every one hard-earned. I honestly don't understand how any student can willingly contemplate going into debt for tens or even hundreds of thousands of dollars, to earn a qualification that won't produce a salary sufficient to repay those study loans. It makes no sense to me at all. I can't figure out how young people today can't see this problem for themselves, but apparently they can't.
I hope very few of you, dear readers, are facing this dilemma right now, but I'm sure some of you are. How are you planning to cope with it? Can you afford to cope with it in this post-pandemic business environment? Please let us know in Comments, so we can learn from each other.