- More than 2 in 5 (45%) of federal student loan borrowers expect to go delinquent on their student loan payments once forbearance ends.
- Even though they have not been making student loan payments, 53% of federal student loan borrowers say they are struggling to pay other bills (e.g. auto loan, mortgage, credit cards)
- More than 2 in 5 (44%) federal student loan borrowers do not think the return on investment for higher education in America is worth the expense.
The Supreme Court’s decision to strike down President Biden’s plan to forgive a portion of federal student loan debt for nearly 37 million borrowers means those borrowers will need to resume monthly payments after a 3+ year hiatus. This is grim news for American student loan borrowers who don’t feel confident in their ability to juggle student loan payments, and at a time when credit card debt is at an all-time high in the United States.
According to a study conducted by The Harris Poll on behalf of Intuit Credit Karma among 2,059 U.S. adults ages 18+, nearly 1 in 5 Americans (18%) have outstanding federal student loan debt, either for themselves or for a child(ren). Black Americans are more likely to report having outstanding federal student loan debt (30%) compared to Hispanic (19%) and White (15%) Americans.
Not only do federal student loan borrowers have to grapple with how they’re going to afford to resume payments come October, but three quarters of them (75%) are also on the hook for providing financial support to their families, whether that be paying for their food, clothes, rent or other bills. October will also mark the first time that more than a third (36%) of borrowers have ever had to make payments toward their federal student loans. Federal student loan borrowers with an annual household income (HHI) of less than $50K are almost twice as likely as those with an HHI of $100K+ to say they have not yet made any payments on their federal student loans (48% vs. 25%).
All of these factors at play beg the question: is the return on investment (ROI) for higher education in America worth the expense? For more than 2 in 5 federal student loan borrowers, the answer is no, as 44% say it’s not worth the expense. Even more concerning is the fact that more than half of federal student loan borrowers (58%) say that the thought of resuming payments on their student loans negatively impacts their mental health.
Borrowers risk slipping backwards once payments resume
More than half of federal student loan borrowers (56%), including 57% of those who provide financial support to family, say they will need to choose between making their student loan payments or paying for necessities (e.g. rent, bills, groceries), as they cannot afford both. Borrowers with an annual HHI of less than $50K are significantly more likely than those with an annual HHI of $100K+ to say they will need to choose between making their student loan payments or paying for necessities (68% vs. 45%).
Having to account for an increase in expenses once payments resume is one thing, but even with the extended forbearance period, nearly 2 in 5 federal student loan borrowers (37%) say they have not saved money in anticipation of resuming their payments. That could have something to do with the fact that more than half (53%) of federal student loan borrowers say they are currently struggling to pay other bills (e.g. auto loan, mortgage, credit card), even though they have not been making their student loan payments.
Given the financial struggles many borrowers are facing today, it is no surprise that more than 2 in 5 federal student loan borrowers (45%) say they expect to go delinquent on their student loan payments once forbearance ends. Borrowers with an annual HHI of less than $50K are significantly more likely than those with an annual HHI of $100K+ to say they expect to go delinquent (53% vs. 36%).
How are borrowers preparing for payments to resume?
A vast majority of federal student loan borrowers who will resume payments come October (90%) say they will need to make changes to be able to afford their monthly payments for their student loans. Here’s a breakdown of the changes they will need to make:
| Which of the following changes will you need to make to afford your monthly federal student loan payments? | % of federal student loan borrowers | % of borrowers with a household income less than $50K | % of borrowers who provide financial support to their families |
| Decrease spending on non-necessities (e.g. eating out, subscriptions) | 49% | 47% | 48% |
| Take on additional work to increase income | 40% | 41% | 43% |
| Apply for an income-driven repayment (IDR) plan to lower monthly payments | 34% | 41% | 31% |
| Dip into emergency savings | 26% | 19% | 26% |
| Put off key financial milestones (e.g. getting married, having children, buying a home) | 25% | 22% | 26% |
| Decrease retirement savings contributions | 23% | 15% | 24% |
| Look for more affordable housing | 21% | 24% | 24% |
| Move in with family and/or friends to save money | 14% | 19% | 14% |
| Sell stock or investments | 11% | 7% | 11% |
| Other | 1% | 1% | 1% |
Borrowers are juggling various debt obligations
As borrowers make lifestyle changes to better position themselves to be able to afford their monthly federal student loan payments, they’re also having to pick and choose which debt obligations to prioritize. The good news is, a majority of borrowers who will resume payments in October (72%) are prioritizing their federal student loan payments over other types of debt. The bad news is that other debt payments – some with very high interest rates – could fall to the wayside, with the potential to negatively impact their financial standing. It’s worth noting that the Biden administration put in place a one-year leniency program, which temporarily eliminates some of the typical consequences that come with missing payments (e.g. won’t be considered delinquent if payments are missed).
Among federal student loan borrowers who will resume payments come October, 2 in 5 (40%) say paying down credit card debt will take lower priority compared to making student loan payments. Other debts borrowers plan to deprioritize over student loan payments, include: medical debt (27%), personal loans (21%), auto loans (20%), buy now, pay later debt (14%), mortgage debt (13%).
On the flip side, 18% of federal student loan borrowers who will resume payments come October say their student loan payments will take lowest priority over other debt obligations.
Student loan forbearance helped borrowers make financial progress
One thing we likely know to be true is that during the pandemic, many Americans were able to make progress in certain areas of their financial lives because of the various relief efforts in play. In fact, more than half (53%) of federal student loan borrowers say they were better positioned financially to make payments toward their student loans during the pandemic than they are now.
The past 3+ years of federal student loan forbearance gave American borrowers the opportunity to make financial progress in other areas of their lives. Here’s a breakdown of what borrowers who paused federal student loan payments were able to do as a result of those payments being paused:
| Pay for necessities without struggling (i.e. paying on time/in full, not having to make sacrifices in order to pay) | 52% |
| Pay down other debt | 40% |
| Build general savings | 31% |
| Build emergency savings | 27% |
| Save money to buy a home | 17% |
| Put money toward retirement savings | 17% |
“Federal student loan borrowers will face a new normal as payments are set to resume after a 3+ year hiatus,” said Courtney Alev, consumer financial advocate at Credit Karma. “While many borrowers were able to get ahead in other areas of their finances during forbearance, others struggled to stay on top of other bills and expenses, likely a result of inflation and today’s high cost of living. We recommend borrowers review their cash flow over the last few months to see if they have money left over to put toward their payments. If that’s not the case, they should look for areas they might be able to cut back on their spending. They can also visit studentaid.gov to learn how they can potentially lower their monthly payments by applying for an income-driven repayment (IDR) plan and/or the Department of Education’s newest SAVE plan.”
Methodology:
This survey was conducted online within the United States by The Harris Poll on behalf of Intuit Credit Karma from July 25-27, 2023 among 2,059 U.S. adults ages 18 and older, among whom 394 currently have federal student loan debt. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.7 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact pr@creditkarma.com.