As of 2023, more than 38 million borrowers owed $1.4 trillion in federal direct student loans. These borrowers are about to begin repayment after a break of several years, or for the first time for those who would have entered repayment for the first time during the pandemic, and many will struggle to afford the payments.
The complicated federal student loan system hinders students’ ability to successfully repay their obligations, says this report from the Education Finance Council. Improved financial literacy education could enhance family decision-making processes and prevent future student loan repayment challenges.
In addition, the report says Congress should remove preferred lender list obstacles that are preventing state-based and nonprofit organizations from offering families additional resources on campuses. These public-purpose entities can help students make responsible borrowing decisions and prevent excessive student loan indebtedness.
Congress could also simplify and reduce the numerous student loan repayment plans currently available to decrease confusion and make it easier for borrowers to understand their choices and successfully repay their obligations, the report notes.