COVID-19 and Inflation Compound Student Debt Crisis
To date, the Department of Education has canceled a total of about $2 billion in borrower defense claims for more than 107,000 individuals.
The current pause on student loan bill payments and interest expires on May 1, and it appears that the vast majority of borrowers are very concerned about being able to afford their payments. In fact, according to a new survey of more than 23,500 student loan borrowers, 93 percent had such sentiments. These worries are largely being driven by the ongoing pandemic and record-setting inflation across the country.
“We have followed the experiences of student loan borrowers for over two years and we are saddened to report their circumstances are getting worse. Our findings show that the ongoing pandemic combined with unprecedented inflation are huge obstacles for borrowers who are, by and large, not ready to resume payments, struggling to afford basic needs, and confused about their options moving forward,” Natalia Abrams, president and founder of the Student Debt Crisis Center, said in a statement.
“To meet this moment, we call for broad debt cancellation to repair the harm caused by this crisis and a roadmap to help borrowers navigate the uncertain future,” she continued.
The survey found that one in three borrowers admitted that they will have to cut spending on necessities like food, rent, and healthcare in order to cover the loan payments. The survey also found that another 27 percent say they will never be able to resume payments again. Furthermore, 91 percent of fully employed borrowers do not agree with the idea that the economy has recovered from the impacts of the two-year-long pandemic. Lastly, 61 percent of respondents who could easily afford their student loan payments before the pandemic began are either struggling to make payments, cannot make payments, or are in default.
A Small Win for Some Borrowers
While the Biden administration hasn’t committed to canceling student loan debt across the board, some borrowers did receive some good news when the Education Department announced that it would wipe out $415 million in federal loans owed by nearly 16,000 borrowers who attended certain for-profit schools.
One such school was DeVry University, which was found to have misled prospective students from 2008 to 2015. The school falsely claimed that 90 percent of its graduates were able to land jobs in their particular fields of study within six months of graduation.
“The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” Education Secretary Miguel Cardona said in a statement. “Students count on their colleges to be truthful. Unfortunately, today’s findings show too many instances in which students were misled into loans at institutions or programs that could not deliver what they’d promised.”
To date, the department has canceled a total of about $2 billion in borrower defense claims for more than 107,000 individuals.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.