A new survey shows many are worried about their financial stability as student loan payments are soon to resume following a three year pause due to the pandemic.
The Credit Karma survey found that 53% of federal student loan borrowers say their financial stability relies on their loans being forgiven.
Next month marks three years since federal student loan borrowers were last required to make a payment on their loans, thanks to the pandemic forbearance that began under former President Donald Trump.
Last November, the Supreme Court voted to temporarily block President Joe Biden's plan to cancel federal student loans for qualifying student loan borrowers. With forgiveness plans in limbo, student loan payments are set to resume this summer or potentially sooner -- raising concerns for borrowers whose finances may have taken a toll from today’s high cost of living.
The survey found the payment pause has allowed borrowers to feel more secure about their money. More than half of survey respondents (56%) say their financial stability relies on not being required to make payments.
More than 1 in 4 borrowers also say they haven't been able to save while payments have been paused because the money they would have paid on their student loans is now going to other necessities.
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"As we near the three-year mark of payments being paused, it appears that peoples' financial situations have stayed largely stagnant, leaving many borrowers stressed and unprepared to resume payments in the coming months," the survey noted. "In fact, in this latest study, a majority of respondents reported their financial situations remained stagnant or declined in 2022 (68%)."
While inflation may be cooling, borrowing costs continue to climb as the Fed just instated its eighth consecutive rate hike, and consumers still face high prices for areas that significantly impact day-to-day life, including shelter, food and energy. Courtney Alev, consumer financial advocate at Credit Karma, suggest that borrowers should start planning a budget now for when student loan repayments resume.
"Start by looking back at the past six months and determine how much you now need monthly for necessities like groceries, rent and utilities. Then, factor in your student loan payments and other bills such as your car payment," Alev said in a statement. "You may need to reallocate funds and dial back in your 'wants' category until inflation trends down, you make headway on your student loans and eliminate or reduce payments, or your income increases."
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The Supreme Court will hear oral arguments at the end of this month ahead of its final decision on President Biden's plan to forgive up to $20,000 in student debt for federal loan borrowers.
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