Student Loans Hindering American Prosperity: Survey

Middle-income Americans believe student loan payments will affect their goals of prospering financially, according to a new survey, as borrowers across the country resumed settling their debt this month, three years after pauses were instituted to give relief to families during the COVID-induced economic crisis.

The Santander Survey conducted early last month and released on Monday comes at a time that Americans are feeling increasingly precarious over their financial futures. The restarting of student-loan repayments adds to the headwinds Americans are facing.

Borrowing costs for things like houses, cars and business investment are at record highs following the Federal Reserve’s hiking of rates to battle inflation. The rise in prices has slowed, but at 3.7 percent, it is still nearly double the central bank’s preferred target of 2 percent.

Nearly 70 percent of those surveyed—which included participants who make between $47,000 and $142,000 a year—say that repaying of their loans “will impact their ability to achieve financial prosperity.” More than 40 percent told surveyors that if they were to receive an inheritance of $50,000, settling their debt would be their top priority, underlying the anxiety that loans place on Americans. Debt was the second obstacle they named stifling their ability to realize financial prosperity after inflation, those surveyed said.

About 44 million Americans owe federal student loans worth a total of $1.65 trillion, according to the Education Data Initiative. Research shows that the average monthly payment is $200 to $300 per month, about 5 percent of a U.S. median salary. The repayments of student loans reduce about 0.4-0.6 percent of total U.S. annual consumption, according to Wells Fargo, whose analysis said that it could lead to some households to turn to credit cards to finance their spending.

The Biden administration has tried to give relief to borrowers and tried to cancel up to $20,000 of loans but that effort failed at the hands of the Supreme Court earlier this year.

The White House has come up with a new approach through its SAVE plan that works to put borrowers on a path toward debt forgiveness quicker. The Education Department is also working on proposals that aim to find ways to help those who are most in need of help with their debt.

Some activists are finding ways to help those saddled with student debt. Last week, the Debt Collective bought and erased about $10 million worth of student debt for alumni of Morehouse, the historically black college, who owed money to the university. It followed a similar effort last year at Bennett College, where it canceled $2 million in debt for alumni.

A Debt Collective spokesperson previously told Newsweek that Black Americans bear the toughest burden in paying for college.

“They have a harder time paying it off. They take longer to pay it off. And, of course, are dramatically underpaid, especially women,” Braxton Brewington said. “So there’s a double-edged sword there, of being underpaid in the workplace and then having borrowed more to go to college, often to make up for that gap of underpay in the workplace. And it ends up burning them.”