Student Loan Forgiveness: According to Sallie Mae’s annual report on how Americans pay for college, 48% of borrowers with college loans hope their debt will be forgiven in the future.
Many of these borrowers believe the government might forgive their student loans. The data comes from online interviews conducted by the global market research firm Ipsos between April 8 and May 14, involving 1,000 undergraduate students and 1,000 parents of undergraduate students.
Consumer advocates warn families not to base their financial decisions on the assumption that their debt will be forgiven, even though there are some relief options available.
Next Student Loan Forgiveness: Find Out When and Who Will Be Eligible for Relief
After the Supreme Court rejected President Joe Biden’s proposal to forgive up to $20,000 in student debt per borrower last summer, many borrowers were left without debt cancellation.
Additionally, upcoming presidential elections could affect current student loan forgiveness programs.
Donald Trump on Student Loan forgiveness
During his time as president, Donald Trump demanded that the U.S. Department of Education discontinue its current loan relief initiatives. Among these is the well-liked Public Service Loan Forgiveness program, which helps public servants like teachers, public defenders, first responders, members of the armed forces, and prosecutors. In addition, Trump sought to cut the department’s funding, and his administration scrapped a rule that would have erased student loans for those who had been duped by their educational institutions.
A request for a response from a Trump campaign spokeswoman was not immediately answered.
Meanwhile, due to several legal challenges, the Biden administration’s new, reasonable repayment plan, known as SAVE, which expedites forgiveness for many borrowers, is currently on hold.
Bottom line: financial experts caution that relying only on loan forgiveness may backfire.
According to Sallie Mae vice president Rick Castellano, “borrowing for college makes sense for some families, but it’s critical to have a plan and do so responsibly.”
Advice on how not to overborrow
Financial experts advise families to borrow prudently as the percentage of borrowers with six-figure amounts on their student loans continues to rise.
Overborrowing can have some negative psychological and financial effects.
Data analyzed by higher education expert Mark Kantrowitz shows that nearly 80% of borrowers who owe between $130,000 and $139,000 in student debt report feeling a “high” or “very high” amount of stress from their debt, compared with just about 25% of those with a balance of less than $10,000.
Kantrowitz previously said to CNBC, “If you borrow too much, you will have less money available for other priorities, like buying a home.”
In addition, he said, “you might have to accept a job that pays less than the one that best fits your career objectives.”
FAFSA Delays: What Causes Delays in Receiving Financial Aid for Students?
According to nonprofit The Institute of Student Loan Advisors president Betsy Mayotte, the basic rule of thumb is not to take out more debt than you anticipate making in your first job.
The amount will change depending on the major a student chooses. On the website of the U.S. Department of Labor, you can find out how much people in different jobs make on average each year.
Kantrowitz says that families should choose a college based on its “net price,” which is the total amount of money that the family will have to pay for it after grants, scholarships, loans, and other costs are taken into account.
Kantrowitz says that when finding out a school’s four-year net cost of attendance, it’s important to keep in mind that different years may have different costs because some schools only help with the first or second year.
You will be able to decide if the amount you need to borrow is right after looking at the total cost and taking into account any money you plan to use to pay for college.
