Borrowers who never completed a degree tend to have a harder time paying off their loans. About 31% of people who took out student loans but never completed an associate or bachelor’s degree are behind on their payments.
Though people with more advanced degrees tend to take on more debt, they’re more likely to make their student loan payments on time. Of the former college students with less than $15,000 of outstanding debt, 21% are delinquent. However, only 17% of adults with $15,000 or more in loans are behind on payments.
Economic Impact of Debt Cancellation
The sheer size of student debt can be characterized as a weight on the U.S. economy as well as a burden on the millions of individuals who owe it. About 92% of student loan debt is backed by the U.S. government. That fact has made it a political issue. During the 2020 presidential election, some Democratic candidates-among them Sen. Elizabeth Warren (D-Mass.) and then-Senate Minority Leader Chuck Schumer (D-N.Y.)-suggested canceling some or all student debt. They said it could be done by a president’s executive order rather than through legislation. In 2021, Sen. Warren continued to call on the administration to cancel up to $50,000 in federal student loan debt for each borrower.
The American Rescue Plan passed by Congress and signed by President Biden in includes a provision that student loan forgiveness issued between , will not be taxable to the recipient.
Pros and Cons of Debt Cancellation
Moody’s Investor Service predicts wiping out student debt would yield a stimulus to economic activity that is comparable to tax cuts in the near term, according to reporting by CNBC. Over the longer term, it could increase homeownership and boost the creation of small businesses. Outright debt cancellation would boost real gross domestic product (GDP) by $86 billion to $108 billion per year, according to one study from Bard College’s Levy Economics Institute.
However, analysts warn of the risk of moral hazard caused by implying that the cost of your decisions will be borne by someone else. This could lead to even higher student debt burdens, as borrowers assume forgiveness will be ongoing. Another argument suggests that forgiving student loan balances will provide, at online payday NM best, a weak stimulus to the economy, because the savings are realized in small amounts over a long period of time, depending on how much a borrower pays back monthly with full or partial forgiveness.
Average Student Loan Debt FAQs
As of 2020, about 30% of all American adults were saddled with student debt, according to the Fed. ? ? That figure reflects the growing importance of a college degree to getting a well-paying job. It also reflects just how much college costs have increased.
How Much Is the Average Student Loan Debt in the U.K.?
Students who graduated from U.K. universities in 2020 owed an average of ?45,000 in student loan debt. By the end of , the estimated value of outstanding loans is ?141 billion. The government predicts only 25% of borrowers (full-time undergraduates) will repay them in full.
How Do You Get Your Student Loans Forgiven?
The U.S. government will currently forgive, cancel, or discharge some or all of an individual’s student loan debt only under a number of specific circumstances. Teachers in low-income schools and public service employees may be eligible for forgiveness of a portion of their debt. People who are disabled may be eligible for discharge of the debt. In August, the U.S. Department of Education said it would cancel $5.8 billion in student loans for borrowers who qualify as having a total and permanent disability.