Student loan borrowers can’t yet breathe a sigh of relief. After being put into action last year, it’s estimated that more than 23 million Americans have already applied for President Biden’s student loan forgiveness plan, although those who qualified have yet to receive any debt relief after the plan was blocked due to legal challenges

Now being reviewed by the Supreme Court, a decision on the plan is expected in June. If upheld, it could provide up to $20K in debt relief for many federal loan borrowers. What does that mean for people with student loans?

CivicScience asked student loan borrowers how they would plan to use the loan forgiveness money if the court rules in favor of the plan. Among those who say they are eligible for the loan forgiveness plan, recent poll results find that one-third would use the extra money to pay down other kinds of debt (such as credit card, auto, and other student loan debt). Compared to results collected in September, the percentage of those who would allocate the money toward paying off debt has increased four percentage points.

Other changes in results are perhaps telling of shifting priorities and a tightening economic outlook among student loan borrowers. Compared to September, poll respondents today are significantly less likely to say they would spend the money on non-necessities, falling from 20% to just 11%. Rather, they are more likely to say they would spend the money on necessities (24%, up from 22%), put it into savings (20%, up from 18%), or purchase a home (8%, up from 6%).

The Personal Impact of Loan Forgiveness

How important is the loan forgiveness plan to student loan borrowers? Nearly one-third (31%) of poll respondents with student loans say it’s likely the debt relief plan would have a major personal impact on their lives. That’s up from just 24% who said the same in September.

Financially, CivicScience data indicate middle-income earners ($50-150K annually) are the most likely to say they would be impacted ‘a lot’ by the debt relief, even more so than lower income earners ($50K or less annually).

Taking a deeper look shows people the most likely to be impacted are also the most likely to allocate funds toward paying off debt. Data show 37% would plan to use that money to pay off debt, outweighing any other use and pointing toward a vicious cycle of debt trapping many student loan borrowers within the 1.75 trillion-dollar crisis. Just 5% of these borrowers would spend it on non-necessities.

In stark contrast, just 12% of potential relief recipients who would ‘not at all’ be impacted by the student loan forgiveness plan say they would use the money to pay off debt, while 25% would spend it on non-necessities.

In fact, credit card debt in particular may be a motivation to apply for student loan forgiveness to begin with. In a separate poll conducted this week, 12% of U.S. adult respondents reported they already applied for President Biden’s student loan forgiveness plan, and 8% say they plan to apply (n=2,811) – that computes to 43% and 31%, respectively, of those who are eligible to receive relief (eligibility is self-reported). Looking at debt status among U.S. adults shows that those who have already applied to the program are the most likely to carry credit card debt, followed by those who plan to apply.

Expectations for the SCOTUS Decision

All in all, the data suggest that nearly three-quarters of eligible borrowers look to take advantage of President Biden’s debt relief plan. One in three claim they would be significantly impacted by the debt relief, and many will look to allocate the money to pay off debt and purchase necessities.  

But although still months away from a ruling, the majority of Americans are not expecting the Supreme Court to rule in favor of the plan. Just 28% of U.S. adults think it’s at all likely to win legal approval, while 60% think it’s unlikely (and 12% don’t have an opinion on the matter) (n=2,454). Political leaning plays a significant role in expectations, however. Democrats are significantly more likely to think the plan will be upheld; 16% say it’s ‘very likely’ and 33% say it’s ‘somewhat likely. Republicans say the opposite; 58% say ‘not at all likely’ and 23% say ‘somewhat unlikely.’

For now, it’s wait-and-see.

Stay tuned for additional findings, as CivicScience continues to track how student loan debt is impacting American consumers. Or work with us to get ahead of the curve.