Students may be borrowing more as Biden administration touts debt cancelation
Expectations of student debt cancellation may be encouraging college students to borrow more money for the coming school year.
A Sallie Mae survey found that the percentage of parents and undergraduate students aged 18 to 24 years who acquired student loans increased from 41% to 49% between the 2022 to 2023 and 2023 to 2024 school years, according to a news report from CNBC. However, surveys had indicated that about 48% of borrowers believe their student debt will be forgiven by the government, 31% of them have slowed their repayments, and 23% of them had halted their repayments altogether. Some experts have suggested that there may be a correlation between the increase in student debt and the ongoing expectation that student debt will be forgiven.
Despite the increases in borrowing, the Biden administration’s income-driven student loan forgiveness plan still faces legal challenges. The administration introduced a separate student loan forgiveness effort that would take effect in October, but this plan is also expected to be stalled over legal battles in court.
The overall student loan debt in the United States is over $1.7 trillion. The experts suggested that the constant promise of student debt cancelation and subsequent litigation could create a confusing climate for borrowers. They recommended that undergraduate students only borrow what they may reasonably earn in a starting salary once out of college. Students were advised to avoid borrowing money under the assumption that the government with clear or reduce their debt.
Read more: CNBC
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