The average college student has $35,359 in student loan debt and will take about 20 years to pay off their balance. Each year, the debt increases. In 2019, the national student debt sat at 1.4 trillion dollars.
Given these crushing numbers, it’s no surprise that a million borrowers default on their student loans every year. The stats have been this grim for a while — that’s why many students have accepted their loans as a large part of life. Few prospective borrowers take the time to educate themselves on what they really need to know before taking out a loan. In fact, 41 percent of students wish they’d spent more time learning about their loan options.
We wanted to see how well people understand student loans, particularly when it comes to student loan forgiveness. So we polled 1,000 Americans on what qualifies you for federal student loan forgiveness and found that:
- 43% of people don’t think you can get your student loans forgiven.
- 71% of Americans have no idea how to qualify for student loan forgiveness.
- 1 in 5 people think being unable to find a job qualifies you for student loan forgiveness.
43% of Americans believe you can’t get your student loans forgiven
When asked when someone might qualify for federal student loan forgiveness, the majority of people had no idea. Only 28 percent chose the correct answer: After 20 years of income-driven repayments. While this certainly isn’t the only way to get your federal student loans forgiven, this is the only correct option listed.
A surprising one in five people thought that being unable to find a job means you may qualify for student loan forgiveness. While you may be able to have your loans deferred if you’re unemployed, your loans certainly won’t vanish.
Worse than misunderstanding how to qualify for loan forgiveness, 43 percent don’t know it’s an option. Those aged 18 to 24 were the most likely to know about student loan forgiveness, but 38 percent still had no idea.
Those aged 45 and above misunderstood student loan forgiveness the most, with over half saying there’s no way to get your student loans forgiven. With student loan borrows in their 50s responsible for $289.5 billion in debt, up from $47 billion fifteen years ago, it’s still critical for older debtors to understand their student loans.
An estimated 39% of student loans will qualify for forgiveness
If that number seems high, it may be because there has been much buzz around the approval rates for a specific type of forgiveness: Public Service Loan Forgiveness (PSLF). In 2017, a reported 99 percent of applications were rejected. Yet the reasons those applications were rejected weren’t often reported. Most were rejected for not making qualifying payments, or simply not filing the paperwork properly. As program understanding improves, some estimate that approval will be at 50 percent by 2024.
Aside from PSLF, there are many programs that offer student loan forgiveness. These include the Teacher Loan Forgiveness Program, as well as other programs for doctors and lawyers.
Additionally, qualifying federal direct student loans are eligible for forgiveness after 20 or 25 years of payments under an income-driven repayment plan. Since the average student will take at least 20 years to repay their loans, this means there will be a number of loans that will also require more time. Of these, it’s possible that many people are paying loans they could have had forgiven.
Americans could be missing out on 228 billion dollars in student loan forgiveness
It’s estimated that the majority of debt is federal student loan debt, about $1.4 trillion. Since an estimated 39 percent of student loans will qualify for forgiveness, this means about 534 billion dollars could be forgiven.
If 43 percent of that money belongs to people who don’t think forgiveness exist, then Americans could be missing out on 228 billion dollars in student loan forgiveness. This drives home the importance of thorough financial education.
It is essential that whether you’re taking out a student loan, or opening a new credit card, you thoroughly understand the implications. Understanding debt and finances may not always be the easiest, but understanding all your options is sure to save you time and money in the long run.
Methodology: This study consisted of one survey question conducted using Google Surveys. The sample consisted of no less than 1,000 completed responses and post-stratification weighting has been applied to ensure an accurate and reliable representation of the total population. The survey ran during November 2019.