Giving Compass’ Take:
• A study from Brookings indicates the way in which COVID-19 impacts student debt, with disproportionately increasing levels in low-income households.
• Why does COVID-19 put ]those in low-income situations in an economic bind? Why might student-debt payments have lower priority? What can we do to minimize the way COVID-19 impacts student debt for low-income households?
Here, we explore the influence that the COVID-19 pandemic has had on student debt, demonstrating the inequities that have let low-income households fall further behind and what this means for these households’ financial outlook. Specifically, we demonstrate how adverse financial circumstances are related to households falling behind on student debt payments; how higher-income households might use relief payments to keep from falling behind on debt payments; and how falling behind on debt payments is related to lower levels of financial well-being.
Within our sample, roughly one-fourth of households (24 percent) had student loans with an average balance of $30,118 (median amount = $14,750). Of 1,264 households with student loans, roughly one-fourth (23 percent) reported being behind on their student loan payments, and over half of these households (58 percent) reported that they were behind on their student loan payments as a result of COVID-19.
As expected in an epidemic that has shut down large segments of the economy, standard household financial measures, such as employment, income, and liquid assets, were significantly related to households falling behind on student loan payments as a result of COVID-19. For example, the proportion of individuals who reported that their households were behind on their student loan payments as a result of COVID-19 was over twice as large among those from low- and moderate-income households (18 percent) when compared to those in high- and middle-income households (9 percent). Furthermore, the proportion of individuals who reported that their households were behind on student loan payments as a result of COVID-19 was over three times as large among those who lost their job or income due to COVID-19 (26 percent) when compared to those that did not lose their job due or income to COVID-19 (8 percent).
Read the full article about how COVID-19 impacts student debt at Brookings.
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