Millions of people are struggling with their student loans. While the government is trying to make it easier for people to repay their loans, there are still some groups of people at a higher risk of not being able to pay back their loans.
The Federal government has created special programs to help low-income borrowers and people with high-interest debts. However, these programs do not apply to everyone. If you are worried about your ability to repay your student loans, it is essential to speak with a financial advisor and research the benefits of debt consolidation loans or other options. Financial advisors can help you take the proper steps to protect yourself from defaulting on your loans.
Who is at risk when student loans come back?
On August 31, 2022, the Federal government plans to end its student loan deferment program. This program allowed people to stop making payments on their student loans temporarily. As of this date, the government will begin to demand that all borrowers resume paying their loans.
Several factors can increase a person’s risk of not being able to repay their student loans. These include:
- Having high-interest debts
- Being unemployed or underemployed
- Having less than a college degree
- Having a low income
Why were student loans deferred?
In March 2020, the US Department of Education paused payments on all eligible federal student loans to help borrowers affected by COVID-19. In addition, student loan interest rates were updated to be at 0% during the deferment period.
While the postponement was meant to be temporary, it’s been extended half a dozen times. There’s still a chance President Biden may cancel student loans as it was one of his original campaign promises. Still, experts recommend that those who have outstanding student loans prepare for the deferment to expire this coming August.
The groups most affected by student loan debt
Not all demographics are affected by student loans the same. Studies have shown that there are a few key groups that will be significantly impacted when the student loan deferment ends, including:
- Black students
- Borrowers who didn’t complete their degrees
Should you make student loan payments now?
There is no one answer to this question. Every borrower’s situation is different and must be considered on a case-by-case basis. If you’re in a position where you can make payments during this time, you should since all of the options available will improve your chances of getting your loans paid off with the least amount of interest accrued. However, if you’re having difficulty making payments or are struggling to pay off your loans in full now, it might be a good idea to seek additional financial assistance. Many programs can help you get your loans paid off faster and reduce the amount of interest that you pay.
The bottom line
There are some groups of people who are at a higher risk of not being able to pay back their student loans. If you are one of these people, it is vital to take the necessary steps to get your finances in order once the deferment period expires this August.