A recent survey highlights a lack of awareness among Americans regarding their eligibility for income-driven repayment (IDR) plans and relief programs, particularly the Saving on A Valuable Education (SAVE) initiative introduced by President Joe Biden. Here are key findings from the survey:
Awareness of IDR Plans
- Lack of Awareness: More than 40% of respondents stated that they did not know whether they were eligible for an income-driven repayment plan. This lack of awareness could result in many borrowers missing out on valuable repayment options.
Student Loan Payments and Savings
- Resuming Payments: Many student loan borrowers are preparing to resume payments in October after a three-year pause. One in five borrowers is facing monthly payments of over $500.
- Potential Savings: The SAVE program, part of the IDR plans, offers the potential for significant savings. Eligible borrowers may see their monthly payments reduced to $0 or realize annual savings of at least $1,000. Borrowers with original balances of $12,000 or less could receive forgiveness of any remaining balance after making 10 years of payments.
Adjustments to Financial Habits
- Budget Adjustments: Seventy percent of student loan borrowers plan to adjust their spending habits to afford essential purchases once payments resume. This includes cutting back on leisure activities (41%), making fewer impulse purchases (37%), and reducing spending during holiday shopping (30%).
- Challenges for Lower-Income Earners: Respondents earning less than $50,000 expressed uncertainty about how they would adjust their spending habits to accommodate student loan payments.
- Potential Increase in Credit Card Debt: A separate survey indicated that 32% of Americans with student loan debt may resort to taking on more credit card debt to meet payment obligations.
- Alternative Solutions: Borrowers are exploring various strategies to manage student loan payments, including considering side hustles (28%), refinancing to obtain better interest rates, and reexamining their budgets.
These findings underscore the need for improved education and outreach efforts to inform borrowers about the available relief programs and repayment options. As the SAVE program and IDR plans offer potential financial relief, borrowers should proactively assess their eligibility and explore these opportunities to manage their student loan debt effectively.
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