A Year of COVID-19: Job Loss, Student Loans, & Medical Debt and their Effect on Low-Income Families Considering Bankruptcy

In 2020, everything changed. For some, their worst fears turned into reality when the coronavirus made it first to Europe, then to the United States. For others, the pandemic’s scope was impossible to imagine until images of freezer trucks hauling away dead bodies began dominating the headlines and facemasks became ubiquitous. The pandemic has ravaged our economy, pushed our healthcare workers to the brink, and demanded inhuman feats of strength and courage from many. 

The human toll of this pandemic is tragically high; it defies imagination. 535,000 dead in the United States alone, with the global death toll exceeding 2.6 million as of this month.^[0] The pandemic’s effect that will linger longest, however, is the financial fallout. 

What happens when millions of people already living paycheck to paycheck get furloughed, laid off, or worst of all, forced to walk away from a job due to their employer’s lack of concern for their health and safety? What happens when the “stimulus” money runs out? What happens if you are already on the brink of financial ruin when your income completely disappears? 

Income Inequality Magnified

While billionaires added between $1.1 - $1.3 trillion to their wealth during the pandemic, millions of Americans have lost their jobs and fallen behind on rent and mortgage payments. More than 54 million people in this country (about twice the population of Texas) faced food insecurity due to the pandemic.^[0]  

With the virus and the 2020 presidential election dominating the news, (un)employment numbers and student loans have been a topic of frequent discussion. Another topic that seemed particularly relevant early in the pandemic was how medical bills and healthcare expenses affect folks. It seems to be less of a topic of discussion a year into the pandemic, but that does not mean people are not struggling with medical expenses or hospital bills they have no way of ever paying back. More likely, it means we have simply stopped paying attention. 

So, what have we learned about how the most vulnerable communities in the “greatest country in the world” have fared over the past 12 months? 

UPSOLVE

Since March 2020, Upsolve has surveyed more than 18,900 individuals (about the seating capacity of Madison Square Garden) considering bankruptcy as a way out (though not all of them have filed). Uncertainty over their future makes using this legal tool a more precarious proposition than ever before. If you are not earning any income and don’t own expensive property, what can creditors really take from you? If debt will continue to accumulate, why file bankruptcy, and foreclose yourself from the opportunity to get a fresh start for 8 years  if you know that nothing will change for you?  In other words, what is the point of filing Chapter 7 bankruptcy now if there is no adequate social safety net that empowers debtors to thrive rather than merely survive post-bankruptcy in a world where COVID-19 and its economic impacts still linger? 

Then, as now, a lack of income and heavy debt burdens keep low-income families – disproportionately families of color – in a perpetual state of near insolvency. By analyzing our users' employment information, medical debt, and student loan balances, we can learn more about the overwhelming constraints on the monthly cash flow for low-income families – constraints that will only become more stringent and suffocating in the coming months.

Upsolve’s free app is available to eligible individuals, which generally means they must earn below the median income in their state, have over $10,000 in dischargeable debt, and have less than $10,000 worth of unencumbered assets. But what else do we know about the average “Upsolver”? 

Upsolve users are 1.6x more likely to be women. 

Since March 2020, 63.9% of Upsolve users are white. 19.2% identify as Black/African American, and 10.9% as Hispanic/Latino. Across all races, Upsolve users are 1.6x more likely to be women. Our Black users are 2.2x more likely to be women and our Latinx users are 1.2x more likely to be women. 

A higher-than-expected number of our users are from Indiana. 

In terms of geography, the largest group of Upsolve users mostly hail from the 10 most populous states. Our largest user communities are based in California, Florida, Texas, Ohio, and New York. An outlier is Indiana, which ranks 17th in population size according to a 2017 US Census State Estimates but represents the 8th largest state for Upsolve users. Indiana’s residents accounted for 3.48% of our folks who completed Upsolve’s survey user base over the last 12 months.

One possible reason for the high rate of Hoosiers among Upsolve users might be Indiana’s decision to protect only stimulus payments and not suspend other debt collection activities, such as wage garnishments.^[0] Why the Indiana Supreme Court decided not to extend these protections to non-stimulus income, considering Indiana’s poverty rate is above the national average at 11.9%, is unclear.^[0] What is clear is the disproportionate impact this decision will have on the poorest in the state as they continue to navigate the pandemic with no economic reprieve. 

Upsolve users are 3.58x more likely to be employed by Amazon than the average American.

Our user base includes folks from all industries. Those employed are 3.58x more likely to work for Amazon and 2.44x more likely to work for Walmart than the average American. Despite working for one of the world’s wealthiest corporations, they cannot make ends meet.

Unfortunately, until Congress passes a meaningful minimum wage increase, all workers earning less than a living wage will continue to navigate life on the edge of the financial cliff that existed before the pandemic. Especially once more than a year’s worth of rent and student loan payments come due all at once. 

The average Upsolve user has a combined total of $512 in their checking and savings account.

The average Upsolve user owns less than $10,000 in assets free and clear. The most valuable asset for many is their vehicle; however, vehicle ownership often comes with a high monthly car payment. 

No assets, no income, no hope? 

It is no secret that our lack of a social safety net for all Americans made the American Dream an illusion for many even before the pandemic. Millions of people struggled financially, seemingly forgotten by policymakers and politicians more interested in ensuring their own re-election. 

In 2019, 4.3 million people (about twice the population of New Mexico) lived below the poverty line.^[0] The official poverty rate was 10.5%, having decreased the prior 5 years. Same Source. Yet, the poverty rate among Black Americans was 18.8% and 15.7 % for Latinx Americans during the same period. By contrast, 7.3% of Asian and white Americans (each) lived below the poverty line. Same Source - Figure 8.  

COVID Relief – real or imagined? 

While countries like Spain^[0] gave a universal basic income to their citizens and others devised a payment scheme for out-of-work folks to receive as much as 80% of lost wages,^[0] the United States attempted to make do with a patchwork of relief efforts. 

How much of a difference has Pandemic Unemployment Assistance, the eviction moratorium, and a pause on student loans really made? These and related aid packages mostly hide the enormous holes that previously existed in our social safety net, like a rug thrown over a stain in the flooring. But, just like the rug does not get rid of the stain, these temporary and entirely inadequate COVID relief measures do not solve the social inequities that have plagued this nation since its birth. 

The average Upsolve user earns 53% less than the national median income. 

Of the more than 2,000 people who completed the income section of Upsolve’s questionnaire, the average expected monthly income is $2,708.61 per month and the median income is $2,538. The median income in the United States in 2020 was $68,703 per year or $5,725.25 per month.^[0]

Black users are citing job loss as a reason for their financial distress more often than white users. Black men have been citing job loss as a reason for filing over 50% of the time since June 2020 (except for September). This number peaked in November when Black men cited job loss as a reason for filing over 62% of the time. New Hampshire has the highest percentage of users citing job loss at 45.3%, followed by 45% in Nevada and 44.1% in California.

Average medical debt has more than doubled for Upsolve users over the past 12 months. 

As of March 2020, the average medical debt carried by users who reported any kind of medical debt was $7,104. A year later, the average amount of medical debt Upsolve users report is $14,866.

21.4% of Black Upsolve users cited medical bills as a reason for filing last March. By March 2021, this number had increased by almost 1.5x to 31.8% of all Black users. Although the average medical debt for men is higher, women are more likely to cite medical bills as a reason for seeking bankruptcy protection. Over the last 12 months, 33% of female users and 27% of male users cited medical bills. Black women were 1.24x more likely than their male counterparts to struggle with medical bills. 34.1% of Black women and 27.4% of Black men cite an inability to pay medical bills. 

Medical debt is leading folks to avoid medical care. 

When users are citing medical bills as a reason for bankruptcy, they also avoid medical care to cut back on expenses. 

Rejection of Medicaid Expansion by certain states as a contributing factor?

According to the Kaiser Family Foundation,^[0] Missouri and Oklahoma have adopted but did not implement the Affordable Care Act’s Medicaid expansion. Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming did not adopt it at all. 

In Wyoming, 69.9% of users avoided necessary medical care in the months before filing for bankruptcy, and 72.6% of users cited medical bills as a reason for filing. In South Dakota, 58.6% of users avoided necessary medical care in the months before filing for bankruptcy, and 67.1% of users cited medical bills as a reason for filing.

More than half of all Upsolve users from Kansas, Oklahoma, South Dakota, and Missouri avoided necessary medical care due to financial reasons. More than half of all Upsolve users from Kansas, South Dakota, Wyoming cited medical bills as a reason for filing bankruptcy. 

The Student Loan Crisis

As of February 9, 2021, there are $1.71 trillion in outstanding student loans held by 47.9 million student borrowers.^[0] $124.4 billion of student debt is in default, and over a million student loans enter default status each year.^[0] Student loan default, and the aggressive collection tactics that follow, affects 9 million borrowers and their families at any given time. 

The average student loan debt of Upsolve users is 69% higher than the national average.

Of the 6,368 folks who we surveyed about student loans over the last year, 51% reported having student loan debt. The average student loan debt owed by Upsolve users with student loans is $66,476. The national average for student loan borrowers is $39,351.^[0] The median student loan balance of Upsolve student loan borrowers is $34,210.

Under the current bankruptcy law, eliminating student loans is hard. In fact, decades of selective litigation and settlement tactics by the student loan industry, especially the Department of Education, have made it seem impossible to many.^[0] So, they don’t even try. And who can blame them - navigating an adversary proceeding to discharge student loans is quite a task even when you have a lawyer. If you’re on your own because you can’t afford a lawyer, it often seems like an insurmountable obstacle. The cruel irony is that debtors facing the kind of “undue hardship” currently required to discharge student loans are least likely to be able to afford a lawyer to do precisely that. 

Black men carry the highest average student loan debt among Upsolve users. 

The racial breakdown of student loan borrowers among Upsolve’s user base again does not match the population breakdown. 57.4% of Upsolve users with student loan debt are white, and 28.1% are Black or African American.

On average, among Upsolve users who completed our survey since March 20, 2020, and who have student loans,

• Black men owe the highest average amount ($77,950.89) among all subgroups with Black women averaging about the same ($77,549.95); 

• Women owe more on average in student loans than men; and

• Asian men owe the lowest average among subgroups ($46,304.41).

Nationally, women, who in 2021 are still earning less than a whole dollar for every dollar earned by a man, hold 58.8% of student loan debt.^[0]  Since federal student loans in default can result in the levy or garnishment of funds otherwise protected (like tax credits and social security income), the financial burden often trickles down to the student borrower’s dependents.

Bankruptcy will not eliminate 31.4% of debt owed by Upsolve users with student loan debt.

For the average Upsolve student loan borrower, student loans made up 31.4% of their debt, meaning close to a third of their debt could not be discharged during bankruptcy. For Black users, this number is higher, with 38.5% of their overall debt tied to student loans. 

This means that even after a discharge, they are unable to access the fresh start that bankruptcy protection exists to the proverbial “honest but unfortunate debtor.” Looking at the staggering balances of student loans Upsolve users face post-bankruptcy, bankruptcy reform must be a part of student loan relief. 

Conclusion

The coronavirus pandemic has weakened our social structures' inequities in a way not seen in modern-day America. Black Americans are more likely to contract and die from the virus.^[0] Decades of economic and educational inequities have been worsened over the last 12 months in a way that will be hard to come back from. Stopgap debt relief measures (student loan moratorium) and temporary aid programs will not be enough for most of our users to meaningfully improve their lives even after bankruptcy. 

We must demand that all employers pay a living wage. Based on the cost of living their employees are paying. And we must provide health insurance and access to affordable healthcare. It cannot be that in the “greatest nation on Earth,” so many forgo necessary medical care because they do not have a way to pay for it. It can’t be that parents have to work multiple jobs to make ends meet only to have most of their money spent on childcare expenses. 

Without attainable bankruptcy relief for student loans, the “fresh start” Upsolve users get from filing bankruptcy does not set them up for success post-bankruptcy. Instead, they are left with tens and hundreds of thousands of dollars in student loan debt that continues to loom over their heads for years to come. 

About Upsolve

Upsolve is a nonprofit that provides free education, community, and tools to low-income families navigating financial distress. To date, Upsolve has relieved over $300 million in debt for families facing dealing with medical bills, job loss, and wage garnishment. Guided by our mission that “Civil rights should be free,” we empower low-income Americans in financial distress to access the protections available in a Chapter 7 bankruptcy even if they can’t afford to hire a lawyer.