A small amount of borrowers say they feel prepared to begin making payments on their student loans again when the forbearance period comes to an end, according to a new survey.
The survey and accompanying white paper from Ascendium Education Solutions was conducted before the Department of Education (ED) announced a one-month extension of the federal student loan administrative forbearance period and the pause in interest accrual, though the results are still salient and underscore the struggles huge swaths of borrowers will likely face when payments are set to resume.
Only 21% of respondents said they believe they will be prepared to resume regular payments when they are required to do so, the national survey of more than 9,000 borrowers found, while the other 79% said they have challenges that will impact their ability to pay once the suspension period ends, with unemployment and underemployment being the leading causes.
Borrowers with federally-held student loans have had their payments and interest accrual paused since March, when Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The debt relief measures were then extended through executive action by President Donald Trump, through Dec. 31, 2020, and again extended one month by ED last week.
The relief is now set to expire Jan. 31, 2021, likely leaving it up to President-elect Joe Biden to provide borrowers further relief unless Congress is able to pass another federal coronavirus package that includes student debt-related measures before he takes office.
Notably, half of respondents in the survey said they don’t know what their monthly payment will be when payments do resume, and nearly two-thirds said they don’t know how to change their repayment plan from the standard 10-year repayment plan to another payment plan that could better suit their needs.
However, 70% of respondents indicated they are satisfied with the information they receive from their student loan servicer, a key finding considering the important role servicers are playing in keeping borrowers informed amid confusion and uncertainty over when repayments will resume.
But the findings suggest servicers can only do so much to keep borrowers informed. Fifty-two percent of respondents who said they are satisfied with their servicer reported going elsewhere for loan information and repayment guidance, such as through internet searches or from friends and family.
Furthermore, 79% of respondents said they would utilize a trustworthy and established student
loan counseling service if one was offered by their school, bank, or employer. The survey is part of a white paper from Ascendium highlighting the need for more sources of information for borrowers — particularly those struggling to make payments — and the burden that student loans have on borrowers’ life decisions.
“Postsecondary institutions, government agencies, financial institutions, and employers must find creative, cost-effective ways to support Americans with student loan debt. They need help navigating the repayment complexities, and it is important they have trustworthy, credible resources to assist them,” Ascendium said in a news release.
With high unemployment rates and an economic downturn likely to continue, the white paper points to income-driven repayment (IDR) plans, which have been more utilized by borrowers in recent years.
But more than one-third of respondents said they don’t know what repayment plan to utilize, and nearly two-thirds said they don’t know how to enroll in an alternative repayment plan.
The “combination of economic uncertainty, debt illiteracy, and a lack of knowledge regarding flexible repayment options are causing borrowers a significant amount of stress as they reenter active repayment,” the white paper stated.
Roughly 65% of respondents said their student loan debt is having a somewhat significant or significant impact on financial decision-making and life decisions, emphasizing the need for additional borrower support.
And it appears some companies are seizing on borrowers’ confusion — a trend that began early on in the pandemic. The survey also found that about one-third of respondents had been contacted by an organization offering fee-based help to manage their student loans. The white paper made clear that these services should be offered to all borrowers free of charge.
“We believe postsecondary institutions and employers should provide borrowers with access to vetted, qualified counselors throughout their student loan journey from college access through full repayment,” the paper stated. “Such an offering … not only offers critically needed support to those who both need and want the help, it could prevent desperate borrowers from paying for costly services of questionable value.”
The online survey was conducted between Sept. 15 and Oct. 5, 2020, with 9,275 respondents from two- and four-year degree-granting institutions.
Publication Date: 12/8/2020