Many student loan recipients report defaulting on payments

A new report says one in five people with outstanding student loan payments aren't making them. Some say they can't afford it, while many say they're waiting for more debt forgiveness from the US government.

“With Biden's SAVE Plan in limbo, many borrowers face uncertainty about whether they'll be able to benefit from lower monthly payments or a clear path to loan forgiveness,” Courtney Alev, consumer finance advocate at Intuit Credit Karma, said in a statement.

“It's great to have hope in the possibility of loan forgiveness, but borrowers shouldn't put all their eggs in the basket,” she said, adding that people struggling to make payments should be proactive in reaching out to their lenders to find out what options are available to them.

The Savings for a Worthwhile Education program is currently defunct because a federal court order barred the Department of Education from offering income-contingent repayment plans. In August, the Supreme Court rejected a White House appeal to temporarily reinstate the program.

Even before the injunction, many of the people who responded to Credit Karma's survey said they were in financial difficulty: They were making too much to qualify for SAVE, but too little to make steady student loan payments.

Another worrying finding from the survey was that 63% of borrowers who have not made consistent payments said they are worried about what will happen to their credit score next month when their student loan repayment history is reported to credit bureaus.

Other findings from the survey include:

• 38% said they had used up their savings to pay student loans
• 37% have reduced non-essential spending
• 31% gained more work
• 26% cut back on basic necessities like food and rent
• 24% applied for various programs to reduce their loan payments
• 21% have postponed major events like buying a home or having a baby

The survey was conducted online in the U.S. by Qualtrics on behalf of Intuit Credit Karma from August 3 to August 19 among 1,995 adults ages 18 and older with outstanding student loan debt.