Student Loan Borrowers Raise Questions About Payments And Debt During The Pandemic

May 27, 2020

Included in the federal government's array of pandemic relief aid programs is an automatic pause – or forbearance – on federal student loans.

Borrowers will not have to make payments on those loans until after the end of September. But when the forbearance period ends, many will not be able to resume those payments. According to the federal office of student aid, more than 20 percent of federal loan borrowers are in default, and millions more are behind in their payments.

The Pew Charitable Trusts has issued a new report on the issues that student loan borrowers reported in focus groups held before the pandemic – including two in Portland. Sarah Sattelmeyer, PEW'S project director for student borrower success, told Maine Public's Nora Flaherty that there were three major issues that emerged from those sessions:

Sattelmeyer: People really, overwhelmingly, wanted to be making payments on their loans. And when they couldn't, it was because they had all of these other financial obligations. So that was one. Another is that many folks struggled early in repayment. So right when they entered, there's a lot of confusion. And then a third one that I think is really important, is that borrowers experienced or took advantage of shorter term programs, so deferments and forbearances, which provide access to shorter term pauses, and often enrolled in these when they faced financial stress because the longer term options were harder to enroll in and more complex, and so when people really needed to laser focus on what was happening in front of them. These longer term, often potentially more beneficial programs, were just not what they chose because of the complexity.

Flaherty: In the larger community of student loan recipients, of borrowers, how is Maine doing? How are we doing at repaying our loans? How many borrowers do we have? How much money do they borrow and so forth?

Maine has just shy of 200,000 student loan borrowers of federal loans. The United States has about $43 million. That average balance per borrower in Maine is just shy of $32,000. And for the United States, that's about $35,000. So the typical or average borrower in Maine has slightly less debt than in the United States. But we do see that about 13% of Maine borrowers are more than 90 days past due on their payments.

And what does that mean generally?

90 days is an important marker because it's when delinquencies are reported to the credit bureau.

It seems like there are complexities and issues with what's going on now, in terms of the the forbearance that's being extended to student loan borrowers right now. But when this is done, when these financial programs that are supposed to make people's lives a little easier during COVID-19, when those are over, what do you think needs to happen?

We're really hoping and advocating that some of the lessons that are learned during the pandemic, and you know, from the research we've done before the pandemic, can help contribute and lead to longer term structural change. So how do we make the repayment system more flexible, more accessible to those struggling most with delinquency and default? Who are those borrowers? How do we identify them? And how do we just make the entire system more user-friendly?