Expert warns that student loan forgiveness may encourage more borrowing among students.

• Despite the current record-breaking levels of student loan debt, college students are still taking out more loans for the upcoming academic year, as per a recent study.
• Debt cancellation expectations may be factor.

Despite the uncertainty of federal student loan forgiveness, college students may borrow more for the upcoming year due to the belief that their debt may be forgiven, according to recent research.

An increasing number of students and their families are relying on student loans to cover the high cost of tuition, according to Sallie Mae's annual report on how America pays for college. In the 2023-24 academic year, about half of families, or 49%, borrowed for college, up from 41% the previous year. Sallie Mae surveyed 1,000 parents of undergraduate students and 1,000 undergraduate students ages 18 to 24 this spring.

The total balance of education debt has more than doubled over the past 15 years, reaching an all-time high of $1.7 trillion, despite the rising cost of college.

According to Sallie Mae, nearly half of student loan borrowers anticipate debt forgiveness after college, with 47% believing the government will do so. Of those who expect forgiveness, 37% plan to work in public service, while 7% say their future employer will pay for their loans.

"Sallie Mae spokesperson Rick Castellano stated that borrowing is on the rise, while half of students expect their loans to be forgiven. This raises the question of whether there is a correlation between the two."

If loans are forgiven, it could encourage more borrowing, he said.

In July, NerdWallet surveyed over 600 adults with student loans and found that 31% of borrowers have slowed their repayments in the hope of having their loans reduced or forgiven by the federal government, while 23% have stopped making payments altogether for the same reason.

According to Sameer Gadkaree, president of the Institute for College Access and Success, it is too early to determine how expectations of federal student loan forgiveness will impact decisions about education debt.

It's uncertain how student borrowing would be affected by the court delays in implementing debt relief plans, according to him.

The status of student loan forgiveness

The Biden administration's attempts to implement student loan forgiveness have faced legal obstacles, with the Supreme Court ruling against President Biden's initial plan last summer.

The Saving on a Valuable Education plan known as SAVE, which was previously income-driven, has been suspended by the Biden administration as they defend their relief program in court.

Another targeted student loan forgiveness plan is expected in October, but Biden's plan for widespread debt cancellation is likely to face the same legal challenges, experts predict.

Student loan borrowers anticipate debt cancellation, while private and public colleges offer financial aid and no-loan policies.

The future of student loan forgiveness may be decided by the upcoming presidential election.

According to Gadkaree, the outcome of the loans and debt situation depends on the court's decision.

'A confusing climate' for borrowers

Student loan borrowers are facing a confusing climate due to the numerous litigations pending, according to NerdWallet loans expert Kate Wood.

Experts advise borrowers to consider their major and future earnings potential when taking on new debt. A common rule of thumb is not to borrow more than you expect to earn as a starting salary.

Experts advise against borrowing more than you can afford to repay, as it may not be wiped out in the future.

Federal borrowers facing debt struggles can find relief through economic hardship and unemployment deferments. Additionally, the SAVE student loan repayment plan, which is currently paused, may provide further assistance.

Wood advised that those considering repayment options should choose the best option currently available, rather than basing their decision on future possibilities.