Latino student loan borrowers fear student loan debt is hampering their lives. The government’s SAVE program could help, but it just got blocked.

In mid-August, a federal appeals court issued yet another blow to student loan forgiveness, leaving millions of borrowers in uncertainty amidst ongoing legal battles.

Launched last year, the Saving on a Valuable Education (SAVE) plan introduced by President Biden is an income-driven repayment plan designed to lower monthly payments and curb the rapid accumulation of interest. However, after a court halted the plan, over eight million borrowers will now enter an interest-free forbearance with no payment requirements. While borrowers will not incur interest during time spent in forbearance, the time spent will also not count for borrowers on track for Public Service Loan Forgiveness. 

“It’s unfortunate that the Biden-Harris Administration’s efforts to alleviate the student loan debt burden, especially for the communities most historically weighed down by this debt, have been brought to a halt. We were finally making progress, and these court interventions have only added unnecessary pain and confusion for thousands of borrowers,” said UnidosUS Senior Policy Advisor Jenny Muñiz.   

As millions of borrowers remain in limbo, UnidosUS, with support from Oportun, a Community Development Financial Institution and provider released the results of its third annual economic survey suggesting that student loans are hampering Latino borrowers’ ability to thrive economically and feel financially secure.

The survey included data from 1,200 predominantly low- and moderate-income Latinos throughout Arizona, California and Texas. Of them, 40% are degree holders who owe more than $30,0000 and 11% never completed a degree yet owe about the same.

UnidosUS is hopeful that a program like SAVE could significantly lower these debt rates, but that can’t happen if the program is on pause. During the administrative stay imposed by the court, the online application for SAVE and other income-driven repayment (IDR) plans has been turned off. While paper applications remain available, student loan processors are temporarily pausing the application processing with no timeline provided for when it’ll resume.

The study showed that 70% of those with less than $14,000 in debt had heard about SAVE, while 78% of those with $15,000 or more had heard about it, but only 7% had actually enrolled. At the same time, one in 10 Latino borrowers (13%) don’t actually know what kind of student loan repayment plan they’re currently on, even though 28% reported they have deferred payments, 25% have used forbearance, 19% have defaulted and 22% have used two or more options. 

Of the Latino student loan borrowers interviewed for the UnidosUS study, 74% noted that this debt has affected their ability to meet basic needs such as housing, food, childcare, healthcare and clothing, and 63% of respondents said their student loan debt has affected their ability to save for retirement, up 3% since 2022. 

“With more than two thirds struggling to meet basic needs like housing, food and healthcare, it’s clear that the burden of debt is untenable for too many Latino borrowers. Our survey shows that immediate action is needed to alleviate the crushing weight of student loans,” said Jenny Muñiz, a Senior Policy Advisor at UnidosUS. 

This debt is also impacting their ability to save money and make investments. For example, 72% reported that their student loan debt has impacted their ability to save money and 58% said it has affected their ability to buy a house, up 1% from last year. 

As if the prospects of doing any of the above amid today’s inflation isn’t daunting enough, nearly one third of Latinos (27%) said they don’t feel confident they can pay off their student loan debt in the next ten years, while 23% of those who had completed a four-year degree same the same. 

Meanwhile, over half – 51% – reported that student loan debt has affected their ability to finish their degree, while 57% said it has impacted their ability to attend graduate school. 

UnidosUS continues to advocate for higher educational degrees because years of research still show those degrees increase one’s chances of obtaining better salaries, job stability and a quality of life for students, but these prospects also hinge on actually completing those degrees and how much debt they incur along the way. 

“Over one in five Latinos are part of the ‘some college, no degree’ subgroup, affecting their earning potential,” stated a July 2022 UnidosUS fact sheet. “This is particularly concerning given the completion gap for Latino students. Six years after entering college in 2015– 51% of Latino students had completed degrees compared to 69% of white students.”

For this reason, UnidosUS advocates for education policies that make it easier to obtain a college degree and for programs like SAVE that help borrowers pay back their student loans without losing their financial footing in other areas.

Asked whether college was worth it in spite of the financial challenges, 60% of respondents said the positive life impact of their investment in higher education compensated for the overall cost. But again, it was still dependent on borrowers’ ability to fulfill their educational goals. An estimated 76% of those who completed their degrees said it had made a positive impact compared to just 24% for those who began school but never finished.

As the future of the SAVE program continues to face legal challenges, the Biden-Harris administration is working on another plan it hopes will be met with less pushback. The new plan would provide debt forgiveness to tens of thousands of borrowers, including those who owe more than they did at the start of repayment, been in repayment for decades, were eligible for forgiveness but had not yet applied, and those who enrolled in low-financial value programs. Swift implementation of this plan is expected later this Fall and will be followed-up afterwards with a broader framework for loan forgiveness to be used by future administration for those facing hardship.

UnidosUS has long advocated making student loans manageable and less of a financial risk to borrowers. The organization’s higher education agenda also emphasizes the need to ensure economically disadvantaged students and parents, in particular,  access and understand financial aid. 

The survey’s complete findings and methodology of the study can be found here.