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About 43 million federal student loan borrowers will soon have to resume payments following a three-and-a-half year payment pause that began during the COVID-19 pandemic. Nearly half could fall so far behind on their loan payments that they end up in delinquency, according to a new survey from Credit Karma.
The survey of 2,059 U.S. adults, conducted in July 2023 and released on Aug. 10, found that 45% of federal student loan borrowers expect to go delinquent on their payments once the pause ends in October. More than half (53%) say they are already struggling to pay other bills such as auto loans, mortgages and credit cards. A similar percentage (56%) say they will need to choose between making their student loan payments or paying for necessities.
Many of these borrowers thought they might get relief through the Biden administration’s federal student loan forgiveness plan, which would have canceled up to $20,000 in debt per borrower. But that plan was struck down by the U.S. Supreme Court earlier this summer.
A separate survey of 1,000 student loan borrowers from Rocket Loans found that more than 38% of respondents would have qualified for $10,000 in loan forgiveness under the Biden plan, while 49.3% would’ve qualified for $20,000.
With debt relief no longer an option, the vast majority of respondents in the Credit Karma survey (90%) say they’ll need to make changes to afford their loan payments. Here are nine ways to keep from falling behind once payments resume.
- Decrease discretionary spending: About half of survey respondents said they will need to cut back on expenses such as subscriptions and dining out to afford their monthly loan payments.
- Earn extra income: About four in 10 federal student loan borrowers plan to get a side gig or pursue some other form of extra income to keep from falling behind.
- Apply for a loan deferment: With deferments, payments are paused for periods of up to several years and are granted under special circumstances such as economic hardship or unemployment. In most cases, the interest owed will continue to accrue, according to USA.gov, though you might also find options where the interest is paused as well.
- Seek forbearance: This is similar to a deferment in that your payments are suspended for a set period of time, but with a forbearance the interest always continues to accrue.
- Apply for an income-driven repayment (IDR) plan: These are available from the U.S. Department of Education and are based on how much money you earn. Under an IDR plan, payments might be as low as $0 per month, according to Federal Student Aid.
- Refinance your loan: Consolidating your student loans can help you better manage your debt and might also extend the duration of your loan and/or lower your interest rate, which can reduce your monthly payment, according to Discover. If you don’t have good credit, however, refinancing your loan now might lead to higher interest because interest rates in general have been on the rise.
- Borrower Defense to Repayment: This is available if you have a direct loan and have either been misled by your school or the school was found to have violated state laws. In both cases, you’ll need to prove that this caused you financial harm.
- Public Service Loan Forgiveness: If you work full-time for a government or not-for-profit organization, you might qualify for forgiveness of the entire remaining balance of your direct loans after you’ve made 120 qualifying payments. To benefit from PSLF, you must repay your federal student loans under an IDR plan.
- Teacher Loan Forgiveness: You might be eligible to have up to $17,500 in student debt cancelled if you teach full-time for five complete and consecutive academic years in certain elementary or secondary schools or educational service agencies that serve low-income families. You must also meet certain other qualifications.
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