Due to a temporary freeze on payments (since March 2020), federal borrowers were spared from making their student loan payments. However, the forbearance period will end on January 31, 2022, which means many people will find themselves in a negative financial situation.
On that note, a survey was conducted to estimate the current situation. Based on the results, a mere 31% of respondents plan to return to their repayment plan, whereas 18% don’t have a repayment plan at all.
Moreover, during the forbearance period, just 22% of federal borrowers made their scheduled payments regularly.
In addition to that, over one-third of respondents claim they won’t be able to pay for everyday necessities, such as bills and groceries.
When asked, “how will the federal student loan payments affect their savings objectives:”
- 43% believe it will affect their ability to save for emergencies or retirement
- 39% think it will affect their discretionary income
- 37% think it will affect their ability to pay other debts
- 36% think it will affect their ability to pay for day-to-day essentials
- 26% think it will affect their ability to invest
- 25% think it will affect their ability to pay for rent or housing
- 25% believe no aspect will be negatively affected
It seems that Millennials will be the most affected age group, seeing how 79% of respondents believe that by the end of the forbearance period they’ll experience numerous financial problems, forcing them to find a higher-paying job.
How did the respondents spend their money during the forbearance period?
- 40% spent their money on everyday expenses
- 31% used the money to pay other debts
- 24% used it to pay their rent
- 22% put the same amount toward federal loans
- 21% added the money to their savings accounts
- 18% used it on discretionary spending
- 15% put some of their money toward federal loans
- 11% invested it
When the forbearance period ends, 31% of responders plan to continue with their repayment process, 29% will sign up for an income-driven repayment plan, 16% will apply for a postponement, and 5% will use the help of private lenders.