$265 billion in student loan debt may not get paid
10 million Americans say they can't afford the repayments.
The Federal government could be losing out on roughly $265 billion in student repayments, with 16% of survey respondents saying they don’t plan on paying back their student loans when repayments resume in October 2023, according to the latest Finder Consumer Confidence Index survey.
Approximately 10 million adults, 22% of student loan borrowers, also say they cannot afford to pay back their loans when student loan repayments resume.
Let’s dive a little deeper.
Will you be able to afford your federal payments when they resume?
Less than two in five borrowers (39%) say they can make their repayments without it affecting their lifestyle. About a quarter (23%) of borrowers say they can afford their repayments, but it will force them to cut back on their spending a little. While 15% say they can afford to service their student loan debt, making those payments will drastically affect their budgets.Graphic source
Do you plan on making your repayments?
About one in six, or 7 million borrowers, say they will not be paying their student loans when repayments resume.Graphic source
As it stands, there is roughly $1.64 trillion in outstanding student loans across the various loan types. With 16% of respondents saying they won’t make their payments, borrowers will refuse to repay roughly $265 billion in student loan debt. To put that in content, $265 billion is higher than the GDP of more than 130 nations including Iraq, Portugal and New Zealand.(1)
Over half of women say they will be negatively impacted once repayments resume
Men (54%) are more than twice as likely as women (24%) to say they can afford their student loan payments when they resume. Whereas women (32%) are almost twice and a half times more likely than men (13%) to say they cannot pay back their loans.Graphic source
While women will struggle more to make their student loan payments, women (18%) are only slightly more likely to say they don’t plan on paying back their student loans than men (15%).
Two in five gen X won’t be able to meet their repayment obligations
Roughly two-fifths (38%) of gen X say they cannot afford their federal student loan payments when they resume, along with a quarter (25%) of millennials.Graphic source
While only 7% of gen Z say they can’t afford their repayments, they’re the largest cohort saying they don’t plan on repaying their loan at 18%.Graphic source
The South most likely to skip out on student loan debt
Over a quarter (27%) of those living in the South with student loan debt say they can’t afford to meet their payment obligations, and almost one in five (19%) say they don’t plan on paying back their loan.Graphic source
When do Federal student loan payments resume?
For those with outstanding student loans, they start accruing interest on September 1, with loan repayments to begin in October 2023. There is a one-year leniency program that will begin on October 1, 2023, and end on September 30, 2024, according to CBS(2).
With October just around the corner, more than a few borrowers will be in for a rude shock, with less than a third (30%) knowing when repayments are set to resume, according to a US News poll(3).
State of student loan debt in the US
As it stands, in Q2 2023, there is about $1.64 trillion in outstanding Federal student loan debt, an increase of roughly 51% from the $1.08 trillion in Q2 of 2014(4).Graphic source
What happens if you don’t pay student loans?
Deciding not to repay your student loans can be extremely detrimental to your personal finances. Not only will delinquent payments be reported to the credit bureaus, negatively impacting your credit score, you’ll also get hit with late fees and run the risk of loan acceleration, which is when you’re required to repay your loan, in full plus any interest you’ve accrued.(5)
Other negative outcomes may include a lawsuit for unpaid debt, which could result in wage, tax refund and government benefit garnishing. It’s also worth pointing out that you can’t discharge student loans in bankruptcy, so your only real choice is set up a payment plan to avoid default.
Rather than not paying your loans, you should look into all the options available to you including the Government’s Fresh Start Program, which offers special benefits for borrowers with defaulted federal student loans.
You may also want to look at refinancing your student loans. Doing so does come with both pros and cons. While refinancing your student loan can help you save money if you’re offered a lower rate, choosing to go with a private lender means you will no longer have access to government programs.
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