Even before the COVID-19 pandemic struck the United States, the burden of repaying student loans was weighing heavily on individuals, including those living in New York City, according to a report that was issued by the city’s Department of Worker and Consumer Protection. Now, as the countdown to restarting student loan payments inches closer to zero, the DWCP is calling for a number of actions, including canceling some student loan debts, and restructuring payment plans to make them more affordable to consumers.
A copy of the report can be accessed by clicking here.
Among the findings of the report are:
- About 20% of New Yorkers had some form of student loan for higher education.
- Half of those with student loan debts owe at least $20,000.
- 12% of individuals were behind on their payments when they were surveyed and 20% had been late with payments at least once in the preceding 12 months.
- More than 60% of consumers were very or somewhat concerned that they would not be able to repay their loans within the 10-year window to do so.
- 49% of consumers with student loan debt said that the debt had kept the from making major life choices, such as saving for retirement, buying a car, or starting a business.
- One-third of consumers say the cost of their higher education outweighed the benefits.
“When students take out loans to fund their higher education, they do so in hopes of eventually achieving financial stability from their college degree,” said DCWP Commissioner Peter A. Hatch, in a statement. “Instead, as college tuition continues to rise, many are left shackled to their debt for decades, or even for life, and forced to delay major life decisions, like purchasing a home, starting a family, or saving for retirement. The student loan debt crisis cannot be ignored—it is crucial that the federal government take immediate action to address the issues set forth in this report and help the millions around the country in financial distress.”
Among the recommendations made by the DWCP are:
- Develop a framework for measuring and monitoring the impact of student loan debt on the financial health of borrowers, including indicators of acute repayment difficulty such as delinquency and default as well as longer-term impacts of student loan debt on the ability of borrowers to accumulate wealth and invest in their future. Based on this improved framework, adapt policy to mitigate the most severe impacts of student debt burden on financial well-being.
- Restructure repayment plans to ensure borrowers can repay their student loans within the standard 10-year time frame. For borrowers in debt stress, this should include some level of student loan debt cancellation, as well as improved IDR plan options that take into consideration regional differences in the cost of living. More outreach is also needed to ensure loan holders understand the repayment options available to them.
- Provide targeted student loan debt cancellation to combat economic inequality and drive economic growth in distressed communities. Prior DCWP research showed that borrowers with low incomes, African-American borrowers, Hispanic/Latinx borrowers, borrowers who did not complete their degrees, and borrowers who attended for-profit schools all struggle disproportionately to repay their student loan debt (Department of Consumer and Worker Protection, 2018).
- Develop a program that identifies and removes barriers for student loan holders who were unable to complete their degree but still aspire to earn a higher education credential.
