According to Sallie Mae’s annual “How America Pays for College” report, nearly half of student loan borrowers, or 48%, expect that their student debt will be forgiven in the future. This expectation is based on the belief that the government will eventually relieve them of their education loans.
Survey Details
The report is based on online interviews conducted by Ipsos between April 8 and May 14, involving 1,000 undergraduate students and 1,000 parents of undergraduate students.
Current State of Student Loan Forgiveness
While there are various opportunities for relief, consumer advocates caution against assuming debt forgiveness will happen. The Supreme Court’s rejection of President Joe Biden’s plan to forgive up to $20,000 per borrower last summer left many borrowers without the anticipated relief.
The upcoming presidential election may also influence the future of student loan forgiveness programs. Former President Donald Trump had previously called for the elimination of existing loan relief programs, including the Public Service Loan Forgiveness initiative. This program benefits public employees such as military personnel, first responders, public defenders, and teachers. Trump also sought to cut the budget of the U.S. Department of Education and halt regulations aimed at forgiving loans for defrauded students.
Legal Challenges and Current Programs
The Biden administration’s new affordable repayment plan, SAVE, which offers expedited forgiveness for many borrowers, is currently on hold due to legal challenges.
Financial Experts’ Advice
Financial experts warn against relying on loan forgiveness and emphasize the importance of responsible borrowing. Rick Castellano, vice president of Sallie Mae, advises families to borrow cautiously and to have a clear repayment plan.
Tips to Avoid Overborrowing
- Be Cautious with Borrowing: As student loan balances grow, especially among those with six-figure debt, financial experts recommend careful borrowing.
- Consequences of Overborrowing: High levels of debt can lead to significant stress and financial constraints, including limitations on purchasing a home or pursuing career goals. According to higher education expert Mark Kantrowitz, nearly 80% of borrowers with balances between $130,000 and $139,000 report high stress levels, compared to about 25% of those with balances under $10,000.