Despite receiving student loan forgiveness under President Joe Biden’s initiative, many borrowers continue to grapple with financial burdens as they accumulate new forms of debt, according to recent findings from a Wall Street Journal report and a July study by a University of Chicago professor.
While the program has eliminated significant student debt, the relief has not translated into improved financial stability or credit scores for many recipients, highlighting ongoing challenges in managing their broader financial health.
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According to a report by the Wall Street Journal and a study released in July, student loan borrowers who benefited from President Joe Biden’s forgiveness program are still experiencing financial strain as they accumulate new debts.
President Biden, who prioritized student loan forgiveness during his 2020 campaign, has continued to advocate for the initiative despite a Supreme Court decision in June 2023, which struck down his proposed relief plan for nearly 40 million Americans.
Despite the elimination of their student loan debts, many borrowers report that financial pressures remain a significant part of their lives, with increases in other forms of debt. According to research by Constantine Yannelis, an associate professor of finance at the University of Chicago, these borrowers are seeing higher balances on auto loans, which have increased by $230, credit card debts by $220, and home loans have also seen a rise. The study suggests that the elimination of student loan debt did not significantly improve credit scores, possibly because many recipients are taking on new loans.
Kimberly Acquaviva, a professor at the University of Virginia School of Nursing, exemplifies this trend. Having accrued about $90,000 in student loans in the ’90s for her studies at the University of Pennsylvania, the debt relief removed her student loans, but the financial relief was redirected to assist her stepdaughter and plans are underway to aid her son with their student loans.
Acquaviva shared with the 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.’ 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.”
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As of July, the Biden administration has canceled $1.2 billion in student debt for 35,000 public service workers and has provided $168.5 billion in relief to 4.76 million student loan borrowers, as reported by the Department of Education.
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