A LendEDU survey conducted on March 18 found that 63% of student loan borrowers were concerned about affording their monthly student loan payments in the wake of the coronavirus, including 88% of those who had lost their jobs due to the pandemic.
But that question was posed before the CARES Act was signed into law on March 27, which placed all federal student loan borrowers into pandemic forbearance until September 30, in addition to implementing an interest rate freeze at 0% on those federal loans.
A more recent LendEDU survey from April 20 showed 54% of federal student loan borrowers would not have been able to make their next federal student loan payment had the CARES Act not been passed, including 61% who had been laid off.
An additional 78% of private student loan borrowers, who are not protected by the CARES Act, also lacked confidence in their ability to make payments.
Addressing student loan debt
As the economy contracts in response to COVID-19, many Americans with student loan debt are unsure if they can repay their student loans. Imagine what college seniors from the graduating class of 2020 must be feeling about their chances?
Not only was their last semester cut short, but they will likely be heading into a recession that features a stagnant job market.
For those in this cohort that have federal student loan debt, is it fair for them to repay the debt they accumulated during the final semester at the rate of full tuition when they recently have hardly received the college experience they signed up for?
All students and especially the seniors who took on federal student loan debt to cover costs for the spring 2020 semester should receive a prorated payment from their respective colleges.
All students and especially the seniors who took on federal student loan debt to cover costs for the spring 2020 semester should receive a prorated payment from their respective colleges to offset the disproportionate amount of debt the students took on when they were expecting to get the full experience of a higher learning institution.
This responsibility does not fall on the federal government because it will also be left in a financial lurch if borrowers are unable to repay their loans. It belongs only to the colleges and universities who get their full tuition rate no matter if it comes directly from the student or the government through loans.
If something like this does not happen, do not be surprised to see more class-action lawsuits.
Preparing for fall
Colleges also stand to be financially impacted by the coronavirus as we move forward. No one really knows how long social distancing measures will be in place, and universities from California to Massachusetts are already preparing for a virtual fall semester.
If that becomes the case, college enrollment levels will take a severe hit and many smaller schools may not survive. The University of Michigan anticipates losses up to $1 billion through year’s end.
‘Softening the blow’
Whether by paying it directly or affording it through debt, why would any student or parent pay for tuition rates that are already too high if they are now not getting the full experience in return?
To mitigate this potential financial ruin that they face, colleges should cut their respective tuition rates for the upcoming 2020-21 academic year. By doing this, they won’t maximize profits but they may maintain enrollment, which would soften the blow.
Just as colleges and universities must help the students and borrowers that were shortchanged this year by giving back some of the tuition that was paid, they must protect themselves going forward by cutting prices and hoping that move will encourage students to enroll next fall, even if the experience will be a virtual one.
In his role as director of communications at LendEDU, Mike Brown uses data to identify emerging personal finance trends and tell unique stories.
UB’s coronavirus page offers complete coverage of the impacts on higher ed.