Where is forgiveness? Student loan debt hits new high
New data released earlier this week by the Federal Reserve Bank of New York revealed that student loan debt hit a new high in the first quarter of 2022. The record total debt of $1.59 trillion represents an increase of $14 billion from the fourth quarter.
As CNBC reported, this particular category of debt now accounts for about 10% of total household debt, which is approaching $16 trillion. It is the second largest category of consumer debt, just behind home mortgages.
The Fed report added that in the first quarter, about 5% of total student debt was past due or in default for more than ninety days.
The release of the data comes as the White House appears poised to make a decision on canceling some student loan debt, likely no more than $10,000 per borrower. So far, the Biden administration has already forgiven more than $17 billion in student loan debt for about 725,000 borrowers.
“Will Biden cancel student loans for all borrowers? No, don’t expect Biden to write off everyone’s student loan debt. Biden also won’t forgive most student loan debt,” Zack Friedman, author and CEO of Mentor, wrote recently. Forbes.
“If Biden enacts full-scale student loan forgiveness, expect limits on student loan forgiveness. For example, Biden could impose an income threshold of $125,000, $75,000 or some other amount. Biden could also limit student loan forgiveness to federal student loans and student loans only,” he continued.
According to CNN, about 19% of households with incomes below $125,000 have student loan debt, according to Matthew Chingos, vice president of education data and policy at the Urban Institute.
“This means that approximately 81% of households below the income threshold have no student loan debt and would see no benefit if Biden took further action,” the outlet writes.
“Most households would still not benefit even if the president did not put in place an income threshold. Only about 18% of households with incomes over $125,000 have student debt.
A recent Bankrate.com poll suggests that high debt is preventing many young borrowers from saving for retirement and building wealth. In fact, about 60% of American adults who have student loan debt have put off making important financial decisions because of this responsibility.
“Despite this, a majority of American adults with student loan debt say their degree unlocked career and salary opportunities that wouldn’t otherwise be possible, highlighting the complicated relationship many Americans have with their student loan debt. student,” Bankrate.com said. report notes.
Ethen Kim Lieser is a Washington State-based finance and technology editor who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow him or contact him on LinkedIn.