As the Supreme Court weighs the challenges to the Biden administration’s plans to forgive up to $20,000 of student loan debt, borrowers remain in limbo, especially the more than 26 million who applied for cancellation, of whom about 16 million were tentatively approved by the US Department of Education. But not all eligible borrowers applied before the court challenges took the application down, and new nationally representative data show that nonapplicants are more likely to have lower incomes and lower levels of educational attainment.
Key Data
Data from the December 2022 edition of the Urban Institute’s Well-Being and Basic Needs Survey show the following:
- Households with family incomes below 200 percent of the federal poverty level, older borrowers, and those where the survey respondent has less educational attainment (i.e., a high school diploma or less, or some college) were less likely to have applied for loan forgiveness.
- Although the burden of student loan debt disproportionately falls on Black borrowers, there are no significant differences in the likelihood of applying for forgiveness by survey respondents’ race and ethnicity.
- Among the 32 percent of survey respondents that said they did not apply for forgiveness, the most common reasons were that the borrower believed their loan was not a federal student loan, they were in the process or planning to apply, and lack of awareness of the loan forgiveness plan.
Implications
Because the future of loan forgiveness is uncertain, there are alternate routes for borrowers seeking relief to consider, including economic forbearance and income-driven repayment (IDR) plans. Many borrowers who have not applied for forgiveness would benefit from IDR, but because of numerous reasons, such as the lack of awareness it is an option for them or the requirement of an annual recertification of income, IDR is substantially underused by borrowers, particularly borrowers with incomes below 200 percent of the federal poverty threshold, borrowers with an associate’s degree or less, and borrowers older than 50.
If forgiveness moves forward, federal policymakers can take additional steps to make sure all who are eligible are given a chance to apply. But if the forgiveness plan is blocked, there are additional ways to ensure that all borrowers know about and can access key loan repayment benefits. Suggestions include automated enrollment in IDR plans for eligible borrowers who applied for forgiveness, increasing communication around loan relief programs, and diversifying outreach to older borrowers and those with less educational attainment.
