Roughly a third of Americans with student loans spent money they would not have normally spent because they were “confident” it would be forgiven under President Joe Biden, according to a new poll.
The poll by Intelligent.com surveyed 977 people who would have qualified for at least $10,000 of debt relief under Biden’s student loan forgiveness plan, which was struck down by the Supreme Court last month. Of those, one in three said they spent “extra money” because they were assuming forgiveness, with many spending that money on things like vacations, retail items, and even alcohol, drugs, and gambling.
“The Supreme Court decision is a cold shower for those who had their hopes pinned on a $10,000 relief,” James Allen, who founded personal finance website Bullpin.com, told Intelligent. “It’s like waiting for a tax refund only to find out the IRS made a mistake.”
The poll found that of the borrowers who spent extra with the hope of the debt being wiped clean, 31% spent between $2,501-5,000, 27% spent between $1,000-2,500, 17% spent between $5,001-$7,500, 9% spent between $7,501-$10,000, and 5% spent more than $10,000. Just 11% spent less than $1,000, according to the poll.
As for what they were spending that money on, the poll found that most respondents who said they spent extra cash did so on retail items, at 44%. The second most common expense was paying off other debts, which 37% of respondents said they did. Other expenses include home and auto payments, childcare, and down payments on vehicles and homes.
About 20% of respondents said they spent that “extra money” on vacations, the poll found, while 8% used it for alcohol or drugs, and 7% used it for gambling.
Over half of borrowers now say they don’t feel prepared once student loan repayment starts back up in October, with 35% saying they’re “very unprepared” and 23% saying they’re “somewhat unprepared.” Over a quarter of respondents also claimed they might “refuse to pay” the $10,000 that would have been forgiven under the president’s plan.
Late last month, the Supreme Court struck down Biden’s loan forgiveness plan in a 6-3 decision, saying, “The Secretary asserts that the HEROES Act grants him the authority to cancel $430 billion of student loan principal. It does not. We hold today that the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.”
According to a White House fact sheet from August, 26 million Americans had applied or were eligible automatically for the debt relief, which applied to people who make less than $125,000 or couples who make less than $250,000. Up to $20,000 would have been forgiven for Americans who received Pell Grants. The Congressional Budget Office estimated the plan had a price tag of roughly $400 billion.