The Philadelphia Fed released an analysis on the student-loan payment pause and forgiveness.
It found the pause on payments is not sufficient to help borrowers chronically struggling with payments.
And while the majority of respondents support debt relief, most of them want it to be targeted.

Putting a pause on student-loan payments isn’t much help to struggling borrowers, a new Fed report found.

On Friday, the Philadelphia Federal Reserve released an analysis of survey results on student-loan repayment and cancellation. Using a national sample of 13,423 consumers from the Fed’s Consumer Finance Institute, the analysis found the more than two-year pause on student-loan payments is not sufficient to help the over one-fifth of “chronically struggling” borrowers who were making no or partial payments prior to the pandemic and don’t see that changing once the payment pause ends.

“These borrowers would benefit from a more comprehensive solution than simply extending blanket administrative forbearance,” the analysis said. “That is because their ability to afford payments has not materially changed since before the pandemic.”

“In other words, for some borrowers, additional forbearance extensions are simply postponing a day of reckoning with loan payments that are unaffordable,” the analysis added.

President Joe Biden has extended the pause on payments four times since he took office, with payments now set to resume after August 31. But for the duration of the pandemic, numerous reports detailed how even with the pause, borrowers would not be financially prepared to foot another monthly bill. For example, a Student Debt Crisis Center survey in February found 92% of fully-employed borrowers were worried about restarting payments amid rising inflation, and 27% said they would never be ready to resume paying off their debt again.

The Fed recommended that the Education Department consider policies that reduce debt for future borrowers, like increasing the use of …read more

Source:: Business Insider

      

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