More than a third of student loan borrowers don’t have enough to eat
If borrowers were challenged to pay off student loan debt before the coronavirus hit, you can imagine their fate in the wake of the pandemic.
Due to pre-existing challenges and a further widespread loss of income, more than a third of student loan borrowers are food insecure, and a majority of them (6 out of 10) typically find it difficult to cover their expenses. expenses, according to our survey of over 1,000 student loan debts. And in May alone, 4 in 10 missed at least one bill or debt payment.
As our results show, relief efforts – such as the suspension of federal student loan repayments and one-time economic impact payments (part of the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act) – have not done enough to address it. repayment for many borrowers.
- Almost half (46%) of student loan borrowers have loss of income due to the economy affected by the pandemic, 34% seeing their wages or working hours reduced, leading to a loss of financial confidence. (Read more)
- Almost half (46%) of borrowers with children under 18 are currently in a situation of food insecurity. And even if those who do not have children are included, this percentage is still 36% for all student borrowers. (Read more)
- 61% of borrowers are difficulty paying monthly bills due to the pandemic, and 41% missed at least one bill in May. (Read more)
- Federal loan borrowers are also divided on how they handle loans. the government’s decision to suspend payments through September: 42% will continue to submit voluntary monthly payments, while 40% will benefit from the deferral until they are required to make payments again. (Read more)
You don’t have to lose your job to see your household income suffer, as our survey respondents can attest.
About 1 in 10 reported being the victim of dismissal or on leave, yet more than a third have seen their wages or hours fall below normal. Likewise, around half of borrowers saw their income decline, echoing the figure of 51% highlighted in another our recent surveys, which specifically covered private student loan borrowers affected by the coronavirus pandemic.
A drop in income has led some borrowers to lose confidence in their personal finances. In fact, about 1 in 7 borrowers say they are “extremely concerned” about their current financial situation.
Along racial lines, borrowers who identified as black or Hispanic were more likely to rate their current situation as 1, the lowest possible score on a five-point scale, than those who were White or Asian.
Fortunately, the government has allowed a suspension of student loan repayments (see below under “Suspension of Federal Loans”), and even when that expires, there is income-based repayment plans available to make payments more affordable. Private student loan support programs can be harder to find, but many lenders have granted breaks during the coronavirus epidemic.
|How student loan borrowers assess their current financial situation|
|Rating||A level of trust||Percentage of borrowers|
|2||Don’t feel so good||20%|
|3||The financial situation could be better, but make it work||38%|
|4||Especially feel good||19%|
|5||Feel very good||ten%|
Of course, a pay cut leaves less money for all expenses, not just student loans. In some cases, just putting food on the table is a struggle.
Nearly half of those polled whose jobs were affected by the coronavirus said food insecurity was an urgent issue for their families. And even including all borrowers, over a third (36%) reported either a “little” (28%) or “a lot” (8%) of problems eating enough.
The proportion of people suffering from food insecurity rose to 45% among those with children under the age of 18.
More broadly, around 77% of borrowers whose income has been impacted by the ongoing pandemic said they had difficulty covering one or more of their monthly bills.
In May alone, 4 in 10 borrowers reported missing a recurring payment, leaving them in arrears on at least one type of consumer debt. This proportion rose to 53% among those who were laid off or on leave or who had their wages or hours reduced.
More often than not, 17% of all respondents were unable to make their payment by credit card, which is of concern, as these tend to have some of the highest interest rates among different types of debt. About 15% of those surveyed also did not pay their loan contributions for private education; It should be noted that private loans generally carry higher interest rates than federal loans.
As noted above, federal student loan borrowers are granted a six-month interest-free payment suspension until September, thanks to CARES Act of Congress. This reprieve allowed millions of student loan borrowers to catch their breath.
While federal loan borrowers are evenly divided on whether to continue sending payments, those who experienced a loss of income were less likely to stay current.
Only 40% of borrowers whose jobs have been affected by the deteriorating economy have chosen to remain in the active repayment of federal loans, compared to 58% whose salaries have not been shaken by the pandemic.
The suspension of repayment of the six-month federal loan was notoriously excluded certain federal borrowers and all private borrowers. On the other hand, economic impact payments have been more accessible (even if these payments did not reach students).
About 83% of our respondents have received or expect to receive an Economic Impact Payment, which can be up to $ 1,200 per eligible person.
How to survive a student loan repayment during the pandemic
No matter how much the current coronavirus crisis has clouded your student loan repayment, thankfully there are plenty of support resources.
If student loans seem like the least of your concerns, focus your energy elsewhere for now. To consult charities to help cover basic needs, especially if you are facing food insecurity or other priority issues. Once you have met these needs, review your student loan repayment and chart a way forward.
Aside from the suspension of federal loan repayments and the ability to lower your monthly payment through income-based repayment plans (mentioned above), all student loan borrowers should contact their lender to verify their options.
While you’re at it, review your resources offered by the state, especially if you have private loan debt. Our Interactive quiz on student loans and coronaviruses could point you in the right direction as well.
Borrowers whose income, credit score, and student loan repayments have not been affected by the coronavirus pandemic may consider student loan refinancing take advantage of the current drop in interest rates. By refinancing your student loan debt with a private lender, you could get a lower rate and only one monthly payment.
Federal loan borrowers should think twice before refinancing, however, as this will irreversibly deprive their government-held debt of one-time collateral such as IDR plans and loan forgiveness programs.