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Amid ongoing record-high inflation, student loan forgiveness may take a backseat.

Brianna Richardson

August 22, 2022 | 1 min read

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Student loan forgiveness may be crushed by inflation concerns

Amid ongoing record-high inflation, student loan forgiveness may take a backseat: 59% of Americans are concerned that student loan forgiveness will make inflation worse. This sentiment remains true across most demographic groups. 

Forgiveness aside, borrowers may still face other hurdles: should loans be forgiven, 39% expect borrowers to have to pay taxes on the forgiven balance; 33% aren’t sure whether borrowers should be subjected to taxes on the forgiven balance and 25% say they don't expect borrowers to have to pay taxes on the forgiven balance.

Americans remain split on the future of student loans

Americans are split on what will happen after August 31, the latest deadline: 

Looking ahead, 34% say loans should be forgiven for those in need, 32% say all student loans should be forgiven, and 30% say no student loans should be forgiven for anyone. These numbers, too, have held steady since January. 

But for now, loan forgiveness is far off: 77% haven’t received any type of loan cancellation or forgiveness. Among the few that have, 15% are currently pursuing the cancellation of their loans, but very few have actually had loans canceled either by qualifying for working in a nonprofit/public role (3%) or because of a special circumstances discharge (3%).  

Federal loan borrowers shift financial priorities amid a two-year pause 

Amid a more than two-year pause on federal student loan payments, the majority of borrowers (61%) say they haven’t continued to make payments during the pause, down slightly from January (67%). Just 20% say they continued their monthly payments while 16% made less frequent payments. 

With the money saved on student loan payments, borrowers shifted their financial priorities: 

Few are spending more: 63% of federal loan borrowers say their spending on other items has stayed the same during the student loan payment pause, roughly unchanged from January (66%). Just 23% say their spending on other items has increased while 11% say their spending has decreased. 

Federal loan borrowers face a mixed financial outlook 

Amid ongoing economic woes, federal student loan borrowers faced a mixed financial outlook: 

But, payment plans provide little relief: 31% of those participating in payment plans say their household finances have improved over the last two years, just slightly above borrowers who don’t have payment plans and say the same (25%). 

Federal loan borrowers most likely to be people of color, women

Nearly all Americans (72%) have some sort of debt, whether it be credit card debt (40%), a car loan (36%), a mortgage (33%), or medical debt (17%). But, just 14% have federal student loans while less than half as many (6%) have private student loans.   

Not all federal loan recipients completed their college degree, leaving them in debt but also without the certification they had borrowed to get: 

With student loan forgiveness, borrowers would focus on major financial goals 

The vast majority of federal student loan borrowers (76%) say they’ll have to delay key life milestones in order to resume student loan payments, roughly on par with January (79%). 

But, should student loan forgiveness put extra money back in their monthly budget, the order of priorities would remain largely unchanged: most would opt to pay off other loans (53%), save for retirement, (45%), invest (41%), buy a home (34%) or travel (32%) while fewer would have a baby (11%), get married (10%), or find a new job (8%).