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According to a recent report in the Wall Street Journal, student loan forgiveness has not helped a number of borrowers who say they remain in financial difficulty.
The article, published Saturday, said many of the more than 900,000 borrowers who had their loans fully or partially forgiven under the Public Service Loan Forgiveness program — and another two million who received the same repayment under other programs — are still struggling with other debts or poor credit.
“Because many have not been able to repay their student loans regularly, they do not suddenly have a new stream of cash available just because the monthly bill is missing,” the article states.
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Student debt is a burden on many Americans, but in recent years many of them have found relief. (Photo: iStock)
According to the Education Data Initiative, the average American borrower’s debt burden from federal student loans is about $38,000. The total amount, including private loans, is over $40,000.
As of August 16, the U.S. national debt stood at $35.17 trillion.
The Public Service Loan Forgiveness Plan wiped out many Direct Loan borrowers’ debts after they made “the equivalent of 120 qualifying monthly payments under an accepted repayment plan” while working full-time for an “eligible employer” in the public sector or for a nonprofit organization.
According to the WSJ, another 1.3 million borrowers “have been approved for relief under a program aimed at students who were misled by their colleges about things like their job prospects,” and relief for more borrowers is reportedly on the way.
The report also quotes Constantine Yannelis, associate professor of finance at the University of Chicago, as saying: “For the typical borrower, debt relief is nice, but it is not life-changing.”
Yannelis and other researchers found that after forgiveness, borrowers typically replace their debts with others, such as credit cards, home equity loans and auto loans.
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According to a recent report, student loan borrowers who have had their debt forgiven often replace the loan amount with increased expenses. (Angus Mordant/Bloomberg via Getty Images / Getty Images)
The same study found no difference in the creditworthiness of borrowers.
One borrower whose student loan debt was forgiven – meaning she stopped making payments due to certain circumstances – is Annetta Walker. She must now juggle her son’s college costs, the loss of her job as a paralegal and her hopes of getting a mortgage, even though she already paid off $82,000 in debt earlier this year.
“I hope to one day buy a home and stop this transient lifestyle,” Walker said, according to the outlet. “And I hope to have some kind of generational wealth for my children.”
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Daniel French said he felt that people like him, who had made sacrifices so their children could stay debt-free, were being left out of the discussion amid renewed efforts to forgive student loans.
Another borrower, professor Kimberly Acquaviva, who had $90,000 in debt forgiven, described the event as “having a sandbag taken off her back,” but added that the relief was moderate.
“Now I’m not in as bad a situation as I could have been,” she said, adding, “What’s changed is not so much our quality of life, but our sense that we have some choice in how we spend that $900 a month.”
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In “Making Money,” EJ Antoni, financial economist at the Heritage Foundation, argues that Americans should continue to worry about inflation.
