Student loan borrowers who benefited from President Joe Biden’s loan forgiveness are still burdened by their finances as their debt is continuing to accumulate, according to a Saturday Wall Street Journal report and a July study.
Biden, who made student loan forgiveness a key promise in 2020, has pushed forward with the initiative despite the U.S. Supreme Court ruling 6-3 in late June 2023 to strike down his plan for nearly 40 million Americans. However, the loan relief, interviews with borrowers who have had their debt eliminated reportedly show that financial stress is still a major component of their daily lives, as debt from other sources piles up, according to the WSJ.
A July study by Constantine Yannelis, an associate professor of finance at the University of Chicago who studies household finance, found that borrowers have accumulated other forms of debt since having their student loans forgiven.
Yannelis’ research shows that borrowers have seen increases in other types of debt: auto loans have risen by $230, credit card borrowing by $220, and home loans have also jumped. Despite having their student loans eliminated, these borrowers saw almost no change in their credit scores, which researchers believe could be due to the loan forgiveness recipients taking out new loans to replace the old ones, WSJ reported.
For example, Kimberly Acquaviva, a University of Virginia School of Nursing professor, took out roughly $90,000 in student loans during the ’90s to complete her bachelor’s, master’s, and Ph.D. at the University of Pennsylvania. While the debt relief eliminated her student loans, she and her husband pivoted to spending the newly available funds on helping her stepdaughter pay off her student loans and are planning to also help their son as well, according to WSJ.
“It took some of the sandbags off of my back. But it was not, ‘Oh yay, now we can do a fun thing.’ It was, ‘OK, now I’m not in as bad a situation as I could have been,’” Acquaviva told the outlet. “What has changed isn’t so much our quality of life but our sense that we have some choice of how to use that $900 a month.”
The Biden administration has forgiven $1.2 billion in student debt for 35,000 public service workers as of July. In addition, the administration has provided $168.5 billion in relief to 4.76 million student loan borrowers in July, according to the Department of Education.
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