According to a new report by Karma, millions of borrowers need to pay their student loan debts, expecting the Education Department to clear them eventually.
The Karma report revealed that 20% of the borrowers had not paid any of their loans. The percentage of borrowers who had paid less than $50,000 a year was 25%. Over 36% of the borrowers stated that they haven’t made consistent payments, hoping that their debts will be fully forgiven.
The Biden administration has designed different programs to clear student debts for millions of Americans. The Public Service Loan Forgiveness program has cleared the student loan debts of many public service workers. Many Americans have gotten their student loan debts forgiven through income-driven repayment programs like the Save Plan.
Biden‘s Education has cleared about $25 billion in student loan debts for 1.3 million borrowers out of 43 million Americans with student loan debt.
Many Americans are still hoping their student loan debts will be fully forgiven, while Republican-led states are taking legal action to block the SAVE plan until a federal court rules on the case.
Biden stated, “From beginning of my administration, I pleged to fight to ensure higher education is a means to the middle class, not a barrier to opportunity.” “I will never stop working to clear student debt—no matter how many times Republican-elected officials try to stop us.”
Republican leaders from Alabama, Florida, Georgia, North Dakota, Arkansas, Ohio and Missouri Attorney General Andrew Bailey stated that the Education Department “unlawfully tried to mass cancel hundreds of billions of dollars in loans.”
Bailey previously stated, “The Biden-Harris Administration is dedicated to saddling working Americans with Ivy League debt, even if they have to break the law to do it. Our latest lawsuit challenges their third and weakest attempt to mass-cancel student loans in the dark of night without letting Congress—or the public—know about it. That’s illegal.”
The current student loan forgiveness plan left many remaining borrowers even with the SAVE plan. 40% of the borrowers earn much to qualify for the SAVE plan but not enough to afford their debt payment.
In an interview, Kevin Thompson, a finance expert and the CEO and founder of 9i Capital Group, stated, “Many borrowers are hoping that the loan will be forgiven, and others are using the loophole that delinquent balances will not be submitted to the credit rating agencies.”
Borrowers are facing increasing challenges in making loan payments due to rising living expenses. According to the study, 38% of the borrowers have depleted their savings, and 44% and 41% of Gen Z and millennials have depleted their savings, respectively.
Thompson stated that borrowers defrauded by for-profit schools to be part of non-creditable programs are among the many borrowers still waiting for debt forgiveness.
Thompson said: “The reality is that some individuals were coaxed into enrolling at for-profit entities that were not reputable, many of which are now bankrupt.” “These schools, known for taking advantage of the system and using government funds to enrich themselves, are the true culprits in this scheme. These schools exploited federal and private loan programs, leaving many students with debts they could not repay and degrees that were often worthless.”
Alex Beene, a financial literacy lecturer at the University of Tennessee at Martin, stated that missing payments can have devastating effects on borrowers’ financial futures.
Beene told the media, “Missing a payment or multiple payments could destroy your credit score, making it more difficult to apply for other financial products and services.”
“More importantly, there’s a lack of understanding on how most of the current forgiveness plans work. Most require you to have made and never missed monthly payments for extended periods of time, from 10 to 20 years in length. Even if further student loan forgiveness arrives, the odds are high it will have similar requirements, and if you’re failing to make payments currently, you won’t qualify regardless.”
