Personal Finance

Supreme Court decision on Biden's student loan forgiveness plan is key for those who never finish college

Key Points
  • The Supreme Court's decision on student loan forgiveness will be especially meaningful for borrowers who started college but never finished.
  • For them, managing education loans without the benefit of having higher earning potential is especially difficult.
Students prepare for loan repayment as the U.S. Supreme Court hears debt forgiveness case
Students prepare for loan repayment as the U.S. Supreme Court hears debt forgiveness case

At the very least, the Supreme Court's pending decision on President Joe Biden's student loan forgiveness plan will shed more light on the overwhelming burden of education debt.

Increasingly, borrowers are struggling under the weight of a growing tab. As of the latest tally, borrowers owe a combined $1.7 trillion.

For those who start college but never finish, managing such a hefty amount of debt is especially difficult.

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Why more students are dropping out of college

Although college enrollment declines have leveled off overall, the number of students who started college but then withdrew rose 3.6% in the 2020-21 academic year, according to the National Student Clearinghouse Research Center. There are now more than 40 million students who are currently unenrolled.

"Growing numbers of stop-outs and fewer returning students have contributed to the broader enrollment declines in recent years," said Doug Shapiro, executive director of the National Student Clearinghouse Research Center.

Among students who put their education on hold, most said it was due to a loss of motivation or a life change, according to a report by education lender Sallie Mae. Others cite financial concerns, followed by mental health challenges.

"There's a variety of issues students face in college, many unexpected," said Rick Castellano, a spokesperson for Sallie Mae. "In some cases, it could be an unpaid bill."

Students with 'some college' more likely to default

If Biden's plan to cancel $400 billion in student loans is blocked, default rates may spike, the U.S. Department of Education has warned.

But the borrowers most in jeopardy of defaulting are those who start college but never finish.

"If you are a student who has some college but no degree you didn't realize the benefit of that education and it's even more difficult to repay the loan," Castellano said.

The default rate among borrowers who leave with student debt but no degree is three times higher than the rate for borrowers who have a diploma.  

If a student defaults, it's not only a loss for them, but also for the institution of higher education and the federal government, Castellano added. "It's a key moment for all of those stakeholders."

Forgiveness 'is really focused on the back end'

Meanwhile, college is only getting more expensive. Tuition and fees plus room and board, books and other expenses for a four-year private college averaged $57,570 in the 2022-23 academic year; at four-year, in-state public colleges, it was more than $27,940, according to the College Board, which tracks trends in college pricing and student aid.

Next year, some colleges said they will hike tuition even more, citing inflation and other pressures.

Still, many would-be students believe that getting a degree is worth it and continue to borrow to make college possible.

"Regardless of where the Supreme Court lands, forgiveness as a solution is really focused on the back end," Castellano said. "It could absolutely help, but how do we ensure we're not back in the same place five years from now?"

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