48% of American students are hoping to get student loan debt forgiveness in the future!
According to Sallie Mae’s “How America Pays for College 2024” report, 48% of students who use federal student loans are hopeful that the government will relieve them and believe they will receive student loan debt forgiveness after they finish college.
This report is based on online interviews conducted by global market research firm Ipsos between April 8 and May 14. The survey included 1,000 undergraduate students and 1,000 parents of undergraduates.
Financial experts advise against counting on loan forgiveness. This warning is particularly relevant given the recent Supreme Court decision that blocked President Joe Biden’s proposal to cancel up to $20,000 in student loans per borrower, leaving tens of millions without the anticipated relief.
On top of that, President Biden’s new repayment plan, SAVE, which offers more affordable payments and quicker loan forgiveness for many borrowers, is facing several legal challenges and remains on hold. So, “borrowing for college makes sense for some families, but it’s critical to have a plan and do so responsibly”, according to Rick Castellano, vice president of Sallie Mae.
How To Avoid Overborrowing
Overborrowing can have severe financial and emotional impacts. According to data analyzed by higher education expert Mark Kantrowitz, nearly 80% of borrowers with $130,000 to $139,000 in student debt report experiencing “high” or “very high” stress levels, compared to just 25% of those with less than $10,000 in debt.
“If you borrow too much, you will have less money available for other priorities, such as buying a home. You may also have to take a job that pays better as opposed to the job that matches your career goals”, Kantrowitz noted.
A general rule is to avoid borrowing more than your expected starting salary, advises Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit organization. This amount can vary depending on the student’s chosen major. You can check the U.S. Department of Labor’s website for average annual salaries across different occupations.
Kantrowitz also suggests that families consider colleges based on the “net price”, which is the amount they will need to pay after accounting for savings, income, and any loans. When estimating the total cost of attending a school for four years, it’s important to remember that costs can vary from year to year, especially since some colleges only offer financial aid for the first one or two years. By calculating the total cost and considering the funds you plan to contribute, you can determine if the amount you need to borrow is reasonable.