Student Loan Update: One in Five Americans Skips Repayments – What Can Be Done?

As the cost of living continues to rise, a troubling statistic has emerged: one in five Americans with student loans has yet to make a payment toward their debt. A recent survey, conducted by polling company Qualtrics on behalf of Intuit Credit Karma, reveals that 20% of borrowers have skipped payments, with many stating they simply can’t afford to pay during these challenging financial times.

For those working in student loan default prevention, this growing issue poses significant concerns. With the potential for loan forgiveness programs like the Biden administration’s SAVE plan, some borrowers may be delaying payments, hopeful that relief is on the horizon. However, relying solely on loan forgiveness can be risky, as financial experts suggest. In this article, we’ll explore the current landscape of student loan repayments, examine borrower concerns, and discuss ways to prevent falling into default.

Survey Highlights: Struggling Borrowers in America

According to the survey, conducted between August 3 and August 19, 2024, 1,995 adult participants with outstanding student loans shared insights into their debt challenges. The results shed light on just how difficult it is for borrowers across income levels:

• 20% of borrowers** have never made a single payment toward their student loans.
• 65% of low-income borrowers** (earning less than $50,000 annually) stated they could not afford their payments.
• 55% of all borrowers** surveyed indicated they currently cannot afford to make payments.
• Even among higher earners, 40% find themselves in a financial bind—they make too much to qualify for programs like the SAVE plan but not enough to comfortably pay off their debt.

This situation has become especially urgent as interest accrues and debt balances continue to grow, leaving many Americans uncertain about how to manage their student loan obligations.

Confusion Surrounding the SAVE Plan

The Biden administration’s SAVE (Saving on a Valuable Education) Plan, a proposed solution to help millions of borrowers by lowering monthly payments and offering potential forgiveness, has faced significant  legal challenges. Despite the hope it offers, the plan remains in limbo, with the Supreme Court not expected to issue a ruling until next summer.

The survey revealed that 68% of borrowers are confused by the ongoing legal battles surrounding the SAVE plan, unsure of how it might impact them. Yet, 76% of borrowers remain optimistic that the SAVE plan will be implemented, offering them a pathway to debt relief. With so much uncertainty, many borrowers are delaying payments in the hopes of future forgiveness, a strategy that could lead to growing balances and deeper financial strain.

What Borrowers Can Do to Prevent Student Loan Default

While it’s understandable that borrowers may be holding out for potential loan forgiveness, financial experts urge caution. As Courtney Alev, consumer financial advocate at Intuit Credit Karma, points out: “While it’s great to have hope in potential loan forgiveness, borrowers should not put all their eggs in that basket.” Instead, Alev recommends taking proactive steps to manage student debt now.

Here are a few key strategies borrowers can use to avoid falling into student loan default:

1. Explore Repayment Options: Borrowers who are struggling to make payments should reach out to their loan servicers to explore available repayment options. Programs like income-driven repayment (IDR) plans, forbearance, and deferment may provide temporary relief.

2. Stay Informed About Loan Forgiveness: While the SAVE plan is still uncertain, it’s crucial for borrowers to stay informed about other potential loan forgiveness options. For those working in public service, certain forgiveness programs remain available.

3. Communicate with Loan Servicers: Open communication with loan servicers can prevent borrowers from falling into default. Whether you need more time to repay or are seeking to adjust your payment schedule, addressing the issue head-on can save you from more significant financial challenges down the road.

4. Seek Financial Counseling: Borrowers can benefit from speaking with financial counselors who specialize in student loan default prevention. These professionals can provide personalized advice on how to manage debt and avoid default.

5. Be Cautious of Relying Solely on Forgiveness: As tempting as it may be to wait for loan forgiveness, growing balances due to missed payments and accrued interest can lead to an even more challenging situation. If you’re unsure about your options, speaking to a financial advisor can provide clarity on the best course of action.

Why Student Loan Default Prevention Is Critical

For borrowers facing financial difficulty, the threat of default looms large. When a borrower defaults on their student loan, the consequences can be severe, including damaged credit, wage garnishment, and a diminished ability to secure future loans. That’s why it’s crucial for borrowers to take action before they reach the point of default.

At Champion Empowerment Institute, we specialize in student loan default prevention, offering resources and mentorship to help borrowers understand their repayment options and avoid falling into default. Through our mentorship programs, we provide tailored advice and guidance, empowering borrowers to navigate their student loans with confidence.

The Path Forward for Borrowers

With so many Americans struggling under the weight of student loan debt, it’s clear that a long-term solution is needed. While many are holding out hope for loan forgiveness, taking proactive steps to manage student loans now is essential. Whether it’s exploring repayment plans, communicating with servicers, or seeking professional guidance, borrowers should prioritize staying on top of their debt to avoid the costly consequences of default.

For those who need help navigating their student loans, we encourage you to explore Champion’s mentorship programs and online resources. Their goal is to ensure that borrowers have access to the tools they need to stay on track and achieve financial independence.