Now that the Biden administration’s plan for student loan forgiveness has been overturned, many borrowers are considering taking matters into their own hands by boycotting payments, according to a recent poll. Sixty-two percent of the 1,000 federal student loan borrowers surveyed by independent researcher Intelligent.com this month said they’re likely to withhold payments, and about half believe the boycott could lead to total debt forgiveness. With 43 million Americans collectively holding more than $1.75 trillion in outstanding student loans, some borrowers believe a mass boycott could increase their collective bargaining power, said Rikin Shah, former head of business operations at student loan refinancing company Earnest and now chief executive of life insurance broker GetSure. In some instances, boycotts can work (remember Bud Light?), but financial experts warn this one is likely to fail and end up only hurting the boycotters.
Borrowers, strained by two years of elevated inflation and the highest interest rates since 2001, may feel desperate, Shah said. Forty-eight percent of borrowers see student debt as a national crisis, said a survey by consumer financial services company Bankrate of 3,684 adults who have had or now have student debt. And about 20% of borrowers will likely struggle once payments resume, Consumer Financial Protection Bureau data shows. Payments are resuming at a time consumers are already feeling squeezed and relying more on credit cards to survive. Credit card debt reached a record $1.03 trillion in the three months to June, the New York Federal Reserve said.
Don’t Pay Federal Student Loans? Experts Warn Against Boycotting Payments
A recent poll conducted by independent researcher Intelligent.com has found that many borrowers are considering boycotting payments on their federal student loans. The survey of 1,000 borrowers revealed that 62% of respondents are likely to withhold payments, with about half believing that this boycott could lead to total debt forgiveness.
With over 43 million Americans collectively holding more than $1.75 trillion in student loan debt, some borrowers see a mass boycott as a way to increase their collective bargaining power. However, financial experts are warning that this boycott is likely to fail and could end up hurting the boycotters.
Rikin Shah, former head of business operations at student loan refinancing company Earnest and now CEO of life insurance broker GetSure, explains that while collective action can be powerful and lead to change, boycotting loan repayments comes with a high personal financial risk. Shah advises against the boycott, stating that there is too little chance of success and that the government has no financial incentive to cave.
Borrowers may be considering a boycott due to the strain of elevated inflation and high interest rates. A survey by consumer financial services company Bankrate found that 48% of borrowers see student debt as a national crisis. Additionally, Consumer Financial Protection Bureau data shows that about 20% of borrowers will likely struggle once payments resume, as they are already relying more on credit cards to make ends meet.
There are several reasons why a boycott is unlikely to succeed. Firstly, the federal government has no economic incentive to forgive loans due to a payment strike. Secondly, legally, the federal government is not required to forgive loans outside of existing forgiveness programs or changes to the law. This lack of precedent and legal obligation makes it highly unlikely that a boycott would lead to debt forgiveness.
Boycotters also face severe financial consequences. While the Biden administration has stated that financially vulnerable borrowers who miss monthly payments between October 1, 2021, and September 30, 2024, will not be considered delinquent or face default, interest will begin accruing on September 1, increasing borrowers’ debt balances. Furthermore, once the "on-ramp" period ends next year, boycotters could face damaged credit scores, garnished wages, and seized tax refunds.
Instead of boycotting payments, experts advise borrowers to prepare to repay their loans. This includes estimating monthly payments and exploring income-driven repayment plans that could result in balance forgiveness after a certain number of years. Borrowers should also take advantage of employee benefits that offer assistance with student loan payments. Additionally, cutting expenses and taking on a side hustle can help prepare for loan repayments.
While repaying their loans, borrowers can also continue advocating for policy change through traditional channels such as voting and supporting legislative measures that address student loan reform. Although this may be a slower and less satisfying option, it can contribute to long-term change in the student loan system.
In conclusion, while the idea of boycotting student loan payments may be tempting for borrowers seeking debt relief, experts caution against this approach. The chances of success are slim, and the potential financial consequences are severe. Borrowers are better off preparing to repay their loans and exploring alternative options for assistance and advocacy to address the student loan crisis.
- A recent poll shows that many borrowers are considering boycotting payments on their federal student loans in hopes of total debt forgiveness.
- Financial experts warn against this boycott, stating that it is unlikely to succeed and could result in severe financial consequences for the borrowers.
- The federal government has no financial incentive to cave to the boycott, and there is no legal obligation for loan forgiveness outside of existing programs or changes to the law.
- Instead of boycotting, borrowers should prepare to repay their loans by estimating monthly payments, exploring income-driven repayment plans, and taking advantage of employee benefits and side hustles.
- Advocating for policy change through traditional channels and supporting legislative measures can also contribute to addressing the student loan crisis.