New CFPB Study Shows Impact of Student Loan Forgiveness News ad

While student loan forgiveness has been a focus throughout Joe Biden’s presidency, little is known about the borrowers lucky enough to actually receive relief.

To fill the information vacuum, the Consumer Financial Protection Bureau (CFPB) on Wednesday released a first-of-its-kind study of borrowers whose student loans were partially or fully forgiven.

“Student loan debt relief has been a lifeline for many borrowers, allowing them to make positive changes in their lives,” CFPB Director Rohit Chopra said in a press release. “However, it is clear that many borrowers are experiencing repayment difficulties and more needs to be done to ensure repayment options are accessible and effective.”

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An extensive study conducted between October 2023 and January 2024 found that 63% of borrowers reported having difficulty making payments, and that student debt often causes borrowers to delay buying a home, starting a family, getting a new job, and even starting a medical care. .

Nearly a third of borrowers (30%) said they have at some point gone without food, medicine or other essentials due to student debt.

Who actually got their student loans forgiven?

The Biden administration estimates it has forgiven about $175 billion in student debt for nearly 5 million borrowers.

Instead of broad forgiveness — plans for which have been scrapped and challenged by the courts — the Biden administration has sought loan cancellation through a variety of pre-existing programs that it has overhauled to speed up the forgiveness process.

These include Public Service Loan Forgiveness (PSLF) programs, income-driven repayment (IDR) programs, and loan cancellation initiatives for borrowers defrauded by schools and for borrowers who become disabled.

Before the new CFPB study, researchers had to estimate the number of borrowers whose loans were forgiven by counting the results of this patchwork of programs. A new study takes a comprehensive look at the scope of student loan forgiveness and the financial impact of student loan debt.

About 10% of all federal student loan borrowers have received debt forgiveness on at least one of their loans, according to the CFPB. The average amount of debt canceled per borrower was almost $38,000.

Borrowers receiving student debt relief have a median household income of $50,000 to $65,000, which is lower than the overall median household income of just under $75,000.

In about 1 in 4 cases, the borrower whose debt was forgiven did not complete his or her studies. These borrowers, saddled with debt but without an income-boosting college degree, are among those most struggling with their finances. A separate study shows that 45% of borrowers who forgo the program end up defaulting on their federal loans, making them the most likely group to do so.

The CFPB also tracked demographic factors and found that recipients of student loan debt forgiveness were most likely to be women, blacks, or people at least 30 years old.

Of those who received forgiveness, more than 60% said it helped them make positive changes in their lives, such as starting a family, moving to a new home, saving more money and retiring.

Will Biden cancel more student debt before leaving office?

Despite several attempts by the Biden administration, widespread student loan forgiveness has not materialized. It is increasingly unlikely that this will happen before President-elect Donald Trump takes office.

Broad forgiveness measures, as well as the income-based SAVE plan, continue to be blocked by lawsuits.

The long-standing PSLF program, which has been Biden’s most effective debt relief tool so far, is still in effect, and public sector workers who qualify for benefits under the plan can expect to receive it for the remainder of Biden’s term. Once Trump takes office, his future will become less certain.

In October, just weeks before the election, the Biden administration made its last attempt at forgiveness. Even though Biden’s previous sweeping forgiveness plans were either overturned or put on hold by the courts, the Education Department has unveiled a new, tailored plan that it says is not subject to the courts’ previous decisions.

If this latest plan is not blocked in court, it could provide debt relief to up to 8 million financially strapped borrowers, but Trump’s re-election puts its future in doubt and it is unclear whether the department will do so. enough time to cancel any loans before he takes office.

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