The Ongoing Student Loan Repayment Problem: Everything You Need to Know

• Author: Bryan Miller
• Posted: 2024-12-05

A recent Student Debt Crisis Center survey of over 23,000 borrowers found that at least 93 percent of current student loan account holders don't have enough money to restart payments later this spring on May 1, 2022.

Other borrowers are currently struggling to make payments after learning that the government's federal payment pause didn't apply to them because private companies initially handled their federal student loans or their loans switched to private companies after loan consolidation.

Investigations have also revealed that borrowers have been heavily impacted by severe job changes and losses, housing rent increases and inflation that recent reports have put at a 40-year-high of 7.5 percent.

Officials with the White House, Congress and the Department of Education know that the borrowers are struggling.

Yet, they haven't provided any clear avenue for relief other than cancelling debts for borrowers defrauded by certain colleges and an unfulfilled campaign promise to reduce at least $10,000 of every borrower's student loan obligation.

These facts don't mean that no one has come up with a plan. Several options exist to help borrowers.

Beyond the ones offered by student loan servicers, such as forbearance, deferment, income-based repayment and service debit cancellation, several other options are currently under consideration:

Different Calls to Action

Most people who consider themselves progressive have asked President Biden to reduce student loan obligations by $10,000 to $50,000. Many liberals, moderates and conservatives have recommended that he restrict these debt cancellation to borrowers who truly can't afford to pay their loans because doing so undermines their financial and physical safety, health and overall well-being to the point that making payments can interfere with their rental or mortgage payments or utilities and buying food and other necessities. Many of these politicians believe that he should also consider attaching educational and work requirements that give these borrowers a solid foundation to help them reach their full employment and income potential.

Senator Bernie Sanders recently made a different call to action. After the government cancelled $415 million of fraud-related student loan debt, he asked President Biden to consider cancelling $1.8 trillion, which is essentially all of the current student loan debt held by 45 million borrowers nationwide. He believes that a complete start over and reworking of the entire system via total student loan cancellation is the only way current borrowers can obtain the buffer they need during these hard times and the government can repair the system so that future borrowers don't face similar unnecessary struggles.

Local and National Incentive Offers

Some employers, desperately seeking talent and recognizing the student loan problems, have started to offer loan repayment as an incentive to job candidates. Although the terms of these agreements vary by employer, most offer something along the lines of work in exchange for repayment: They offer to repay the candidate's loans monthly while the candidate works for them or partially or fully repay after a certain amount of time has passed in exchange for the candidate agreeing to fulfill certain terms.

States have taken a different approach.

Many states, desperate to attract workers to certain impoverished or low census areas or regions that younger workers previously abandoned and current populations skew too much toward non-working seniors, now offer student loan repayment as a relocation incentive.

A recent proposal in Maine currently under consideration, for example, would help borrowers pay off up to $40,000 if they're first-time home buyers who relocate to the state and stay for at least five years. Maine is merely one of many states currently considering legislature for student-loan-based incentive programs.

Some states are considering programs that don't require home ownership. Instead, you must maintain residency for a specific time frame, as dictated by the program.

Things You Can Do Today

If you haven't spoken with your student loan servicer recently about your loan obligation, contact them to discuss your account and repayment options.

You might learn that you can use an existing program to give you more time, reduce your payments or clear some or all of your debt.

If you know that you're not eligible and still need help, check out incentive programs run within your state or within any state that you might consider moving to if you pass the eligibility requirements for a student-loan-based home ownership or residency incentive program.

When searching for help online, use "student loans relocation incentives" or "student loan incentive programs" for your keyword phrases.