As President Joe Biden’s stalled student loan forgiveness plan means payments are set to resume on Oct. 1, a growing number of student loan borrowers are claiming they either can’t or won’t repay the debt.
In fact, a new survey by the journal Student Research and Education, Intelligent.com, found that 62% of respondents said they’d consider boycotting loan payments in the fall because nearly half doubt they’ll be able to afford those payments.
Twenty-nine-year-old Shaheem McLaurin took to TikTok to ask tough questions about whether borrowers like him should protest what many see as systemic injustice by refusing to repay their loans.
He said at the conference: “Don’t we pay — collectively, as a whole?” viral video“,” So that means if you make an advance payment, you break the limit, over the limit?
“How are we going to act? Because they can’t keep getting away with these things… If we don’t pay, they are the ones who will suffer, not us.”
Half of the respondents believe that a boycott can lead to full debt forgiveness.
Here are the risks involved in refusing to do so Pay off student loans And why would so many borrowers do that anyway.
Millions face mounting debt obligations
Millions of Americans are collectively in debt $1.6 trillion in student loans, according to the Federal Reserve Bank of New York. Borrowers under the age of 40 owe 55% of this total debt, according to Education Data Initiative
“Millennials like me have been through a lot of economic crises and seen these companies and banks get bailed out,” Amanda Acevedo, a 37-year-old radiologist from Orlando, said in a recent interview with the magazine. bloomberg. “At the same time, we can’t pay back the student loans we’ve been told we need to succeed.”
Acevedo used the loan pause to save up enough money for a home down payment. The mother of three is now expected to pay back $412 per month on her student loans.
Education Data Initiative reported The average federal student loan borrower has $37,338 outstanding, and the average private debt is $54,921 per borrower.
Meanwhile, many borrowers are generally in a worse position to repay these loans than they were before the repayment pause, which the Ministry of Education implemented in 2020 in the early days of the COVID-19 pandemic, began.
Since then, amid the rising cost of living and rising interest rates, borrowers have built up other forms of increasingly costly debt, such as mortgages, auto loans and personal loans.
Last year, the Consumer Financial Protection Bureau (CFPB) identified five risk factors that can cause student loan borrowers to struggle to pay their debts to the point of delinquency — and one of them is the delinquency rate on non-student debt since then. The beginning of the epidemic.
according to June CFPB reportabout 2.5 million student loan borrowers had at least one non-student loan in arrears as of March this year, an increase of about 200,000 borrowers since September 2022.
For those likely to resume paying student loans, average monthly payments on non-student debt obligations increased by 24%. Younger borrowers were hit particularly hard as they saw a 252% increase in their average monthly payments, from $65 to $229.
Read more: A California nurse went viral for showing how she paid off her student loans by the age of 27 while making up to $500,000 a year — here’s to it 5 ways to build wealth without a runaway salary
Possible consequences of not resuming payment
Borrowers who choose to participate in the protest or fail to make payments could face severe financial consequences.
For one thing, defaulting can make a typical student loan much more expensive in the long run, since interest will eventually start accruing.
In some circumstances, lenders can even appetizers Up to 15% of the borrower’s wages Repayment of loans in default. And 19 states have laws that can suspend or even cancel loans for delinquent borrowers Professional licensesaffecting professionals such as firefighter, nurse, teacher, lawyer, and even barber.
The government can also block Social Security benefits, potentially affecting the finances of the millions of borrowers over the age of 62 who have an average outstanding student debt of $41,778. Also, about 23% of the total debt of $1.6 trillion is held by borrowers Over the age of fifty
And in 2022, the Biden administration has taken steps toward Forgive up to $20,000 In student loans for most borrowers, however The Supreme Court ruled against the proposal in June.
However, management seems intent on providing some relief.
Biden has now been out for a year Indulgence program that protects borrowers One of the worst consequences is not paying their student loans.
Under the plan, borrowers will have some room to breathe. Those who fail to make installment payments from October 1, 2023 to September 30, 2024 will not be placed in default or deemed delinquent by the credit bureaus.
Private loan borrowers may have the option to do so Refinance their loans before resuming payments in October.
For those who have government loans, the Biden administration also created Saving on Value Education (SAVE) A plan that offers borrowers reduced monthly payments—calculated according to their income and family size—and prevents unpaid interest from building up loan balances.
These measures could save the average borrower up to $1,000 annually, according to government estimates. Even better, some savings loans can be forgiven entirely after 10 years of qualifying payments.
–With files from Samantha Iman, Associate Senior Editor at Moneywise
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