Achieve Survey Chronicles Post-Forebearance Student Debt Woes

Nearly half of borrowers are experiencing considerable stress following the conclusion of the federal student loan forbearance. More than one in four are concerned that resuming payments will force them to take on more debt to make ends meet, according to a new survey by Achieve, a provider of digital personal finance.

The forbearance program that began in March 2020 was designed to provide financial relief during the COVID-19 pandemic. The resumption of payments in October comes at a time when consumers are grappling with soaring inflation, high-interest rates and record-high levels of debt. The Achieve Center for Consumer Insights surveyed active student loan borrowers to understand how the end of the forbearance will affect their finances and what they’ve done to prepare.

Close to half (45%) of respondents feel extremely or very stressed about resuming their student loan payments, while 28% of student loan borrowers said the resumption of federal student loan payments will likely require them to take on new debt to manage their personal finances.

Achieve found that a similar percentage (24%) of borrowers anticipate needing financial assistance or hardship provisions to resume their student loan payments, and 29% say they feel more burdened by their student loans now than they did when the forbearance began.

“Student loan forbearances brought relief for millions during the uncertain times of the COVID-19 pandemic,” said Andrew Housser, co-founder and co-CEO of Achieve. “But after more than three years, many consumers are now bracing for significant adjustments to their household budgets. Many will even have to delay major life plans and milestones in order to manage their student loans, existing debts and other day-to-day expenses.”

More than half (56%) of respondents surveyed by Achieve did not make any student loan payments during the 41-month-long forbearance, while 30% have made at least some payments, and 14% continued to make all their payments. Over that time, many borrowers used the money that previously went toward student loan payments to fill gaps in their household budgets and to pay down other debts.

Basic living expenses (36%), education and professional development (16%), and building up emergency savings (10%) were also cited uses of these funds. Some (nine per cent) used the money for leisure or non-essential items, while eight per cent used the funds to help pay for a vacation.

Close to half (45%) of respondents told Achieve that they used the forbearance period to address other debts, with these consumers primarily focused on paying down mortgage/rent expenses (27%), credit cards (26%) and past-due bills (24%).

Nearly two-thirds (65%) of respondents have delayed or been unable to make large financial purchases and reach other major life milestones as a direct result of their student loan debt. Just over one in three (36%) have foregone building up an emergency savings fund, and 30% have not saved for retirement.

Other effects Achieve found include:

  • 26% have not paid down other debts
  • 23% have been unable to buy a house
  • 17% have been unable to buy or lease a vehicle
  • 7% report delaying or not getting married
  • 9% said student loans have affected their plans to have children

When student loan payments resume in October, 62% of respondents expect their monthly payments will be less than $250 per month, while 13% expect to owe monthly payments of $500 or more. When asked how the end of the forbearance program will affect their personal finances, 61% believe it will have a significant or moderate negative impact.

Further complicating matters is that nearly two-thirds (65%) of student loan borrowers took on new debt during the student loan forbearance, including credit cards (41%), car loans (17%), personal loans (16%), and medical debt (15%). Among those who took on new debt, nearly one-third (32%) said these new obligations exceeded $10,000, compared to 26% who said their new debt was less than $2,500.

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