If Student Loans Are Forgiven, How Will You Spend the Money? Almost Everyone Says They’ll Do This First
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Vance Cariaga
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Somnia Keesey
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Federal student loan borrowers who counted on the Biden administration’s loan forgiveness plan to cancel up to $20,000 in debt per borrower will be disappointed if the Supreme Court strikes the plan down. Many experts expect that to happen because of the court’s 6-3 conservative majority, though it is no sure thing.
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The two cases related to student debt relief are among 30 the SCOTUS has left to rule on during its current term, NBC News reported. The term usually ends during the last week of June, so a decision on loan forgiveness should arrive in the next few weeks.
If the Supreme Court goes against conventional wisdom by ruling in favor of the loan forgiveness program, nearly 44 million federal student loan borrowers could see some kind of relief. The average federal student loan debt balance is $37,338, according to the latest estimates from the Education Data Initiative.
A new report from the Federal Reserve, titled “Economic Well-Being U.S. Households in 2022,” found that adults ages 30 to 44 were most likely to have taken out student loans for their education, while older adults were less likely to do so.
For borrowers who are counting on student loan forgiveness, there might still be options even if the Biden plan is struck down. These mainly come in the form of deferments and forbearances.
As GOBankingRates reported, President Joe Biden’s Fresh Start program placed $34 billion worth of delinquent or defaulted student loan accounts into “current” status. The program will run for one year after the COVID-19 payment pause ends. As an eligible borrower, you might receive access to student loan forgiveness programs, deferment and forbearance.
One thing is for certain: Federal student loan borrowers are already thinking about what they will do with the money they save should their debt be forgiven. According to the Federal Reserve survey, the majority of borrowers — 57% — say they will use the savings to pay off other debts. That percentage was fairly consistent regardless of age or race/ethnic group.
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Here are the other most popular answers on how borrowers would spend their money in the event of student loan forgiveness:
- Save for other things (outside of a home purchase): 26% of surveyed borrowers.
- Save for a home purchase: 10%. Not surprisingly, this category differed depending on the age group, with 19% of borrowers ages 18 to 29 saying they would save for a home purchase and only 4% of those age 45 and older saying they would save for a home purchase.
- Spend it on other things: 7% of surveyed borrowers.
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