Borrowers Respond to Student Debt Relief
For some of the 45 million Americans with student loans, the Biden administration’s debt relief package is welcome relief, if long overdue. To others, it feels like a band-aid over a worsening injury.
President Joe Biden announced on Wednesday that the government would forgive $10,000 in loans for borrowers who earn less than $125,000 a year and $20,000 for Pell Grant recipients, who must demonstrate exceptional financial need. The president will also extend the moratorium on student debt repayment until Dec. 31 and cap undergraduate loan repayment at 5% of the borrower’s monthly income.
The forgiveness only applies to federal loans, which make up about 92% of the total student loan debt of $1.7 trillion.
In keeping with my campaign promise, my administration is announcing a plan to give working-class and middle-class families a break as they prepare to resume federal student loan repayments in January 2023.
I will have more details this afternoon. pic.twitter.com/kuZNqoMe4I
— President Biden (@POTUS) August 24, 2022
The development comes after the Trump administration implemented a federal student loan moratorium in March 2020 that both deferred payments and set interest rates at 0%. The freeze was intended to provide temporary support to people who lost their jobs at the start of the pandemic. It has now been extended seven times, including today’s announcement.
The freeze gave debtors a chance to catch up on credit card bills, improve their credit scores and save for the first time. With inflation at its highest level in 40 years, the freeze also helped people who were just trying to make ends meet. Feelings are mixed about whether forgiving $10,000 is a meaningful solution to the student debt crisis, with many Americans saying the government should work to make college more affordable for the next generation.
Here’s what some borrowers had to say about the forgiveness plan. These quotes have been edited and condensed for clarity.
The college professor with his own loans
“I’m going to take it, but is it going to affect my life that badly?” Not long term. I kind of made peace that I will repay my loans until the end of time. I returned to school for my PhD in Education in January 2021 and now have $85,000 in loans. I will probably borrow about $15,000 more for this academic year. Because I work in higher education, I should be eligible for a possible pardon, but I don’t until I’m full time in a school. Part of me wants to be idealistic and thinks that forgiveness will come someday in the next two years. It would change my life. I could save my money, leave my parents’ house and start a real life on my own.
Amanda Connelly, 33, West Long Branch, New Jersey
The strategist who has paid off most of his loans (and doesn’t qualify for forgiveness)
“I attended undergrad from 2004 to 2006 and didn’t graduate. I still came away with about $65,000 in loans and my current balance is about $3,800. At this point in time my life, I can’t say that my loans have a big impact on my daily life, but they certainly have an impact on my future goals, like buying a house or opening a small business. forgiveness won’t really affect me because I made too much money last year, but I think it’s great. It’s crazy to think that we’re expected to take these big life decisions with lasting financial implications, especially when people are 17 or 18 years old.
Emma Cardenas, 36, Los Angeles
The lawyer with $277,000 in debt
“My loans don’t have a day-to-day impact, but they certainly have an impact on my future goals. I accepted a position as a public/government attorney partly because I like the job and partly because of [Public Student Loan Forgiveness], which is certainly possible in my work. I hope to be a prosecutor for a while and a loan forgiveness would help me a lot. $10,000 is a drop in the bucket, but I also know that my debt of $277,000 is “cheap” debt from law school. Ivy Leaguers have way more.
Annie Weldon, 31, New Orleans
Graduate Student Arranges for Student Debt Cancellation
“I work with [student advocacy organization] To rise, and be on the brink of a new day, where students can focus less on funding their education, and more on their education itself, is a day we have been waiting for. I was unable to receive all the funding I needed because my parents collectively made too much money, but they did not make enough to fund both my college education and that of my younger brother. I left undergrad with $23,000 in loans. I have now reached $43,000 and saved and prepared for the possibility of having to start payments depending on the response from the administration. For borrowers from marginalized communities, education is our only path to financial freedom. Even with an education, there are still student loans that prevent us from getting that freedom.
Braxton Simpson, 23, Raleigh, North Carolina
The writer who worries about owning a house
“When I graduated from Michigan State I had $21,500 in student loans and my first job was paying me $36,000 a year. Things were incredibly tight on that salary and things got even tighter when my student loan payments started at around $256 per month I currently have $18,207.98 left to pay The $10,000 forgiveness gives me more of a chance to start thinking about investments like the homeownership since I would have more room in my budget Even though I am 30 years old, the idea of adding another loan in the form of a mortgage when I still have my student loans and debt credit card makes me incredibly stressed.
Molly Burford, 30, Detroit
The Equity Trader who consolidated his loans
“I graduated from undergrad in 2005 and trade school in 2007. I consolidated loans at 5.5% and deferred for two years given the bad year 2008 for finance jobs. At the peak, my balance was $125,000, and it currently sits at $89,000. I remember many years when my payment was about a third of my salary, and now it’s $600 a month. It’s manageable for me, but it’s not exactly money for a couch cushion. It’s the difference between owning a house and renting, it’s less about filling the emergency fund, it’s about taking a real vacation instead of a weekend, or extra money to send to mom. My attitude is the same whether or not I qualify for forgiveness: I support any level of debt relief or cancellation, regardless of income threshold or means test.
Kyle Fenton, 42, Austin, TX
The paralegal who just wants a weekend vacation
“I loved college, but it was such a waste of money. Would I do it again? Absolutely – I met a lot of my best friends there and even my husband. Was it worth it? Absolutely No. After graduating from undergrad I owed about $30,000 – combined with my graduate loans I currently owe $57,071.15 My husband and I are lucky we don’t have any. kids (and we don’t want them either) but since the cost of living has gone up it’s hard to sustain our lives I just want to have enough money to visit my friends in every city where they live and hopefully travel overseas one day.
Aeryn Emmerich-Wise, 30, Charlotte, North Carolina
The director of IT operations who worked at the university
“I graduated from undergrad in 2014 with about $32,000 in student debt. I received a college scholarship and worked 30-40 hours a week in restaurants for the four undergraduate years. I deferred repayment of my loans when I graduated because I could barely afford rent and utilities. Those were some really tough years. Overall, I’m in a much better financial situation than before the freeze simply because of my work situation. It’s nice to pay rent and bills on time without stressing out or leaving $20 in your bank account after all. I have focused on paying off credit card debt since then. My balance is now $31,000 and I feel lucky compared to many of my friends and family. I think about my loans every day.
Adrienne Woodland, 30, New York
The grad student who already paid $38,000
“I graduated from undergrad in 2013 and had just under $50,000 in school loans. I used the grace period after graduating to try and save some money, but I was mostly living paycheck to paycheck. Over the past nine years, I’ve reduced my balance to just over $12,000, but I’m now attending graduate school and have taken out additional loans to help cover tuition. The payment freeze that accompanied Covid-19 was instrumental in my ability to build both a strong “rainy day” and a general savings balance, but full debt cancellation would have had a much greater impact.
Morgan Schafer, 31, Cincinnati