The student loan crisis has many on edge. But up to $10,000 in federal student loans could be forgiven. The pause on payments could be extended too.
Millions of borrowers faced once again handing over $300 a month or even more to cover their federal student loan debt beginning Sept. 1.
Now, never mind? It’s quite possible that yet another extension is in the works, according to college experts. We’re looking at the seventh such extension since the moratorium began in March 2020.
As soon as Wednesday, the White House is expected to announce that borrowers can skip payments for at least another few months.
Millions of borrowers have been on edge and unclear about what is next the closer we get to Aug. 31 when the moratorium is set to expire. Some have gotten confusing emails and phone alerts.
Even more important, President Joe Biden is expected to announce a long-awaited program where up to $10,000 in federal student loan debt could be canceled for many borrowers, according to various media reports, including those from The Hill and NBC News. The reports are based on comments from unnamed sources.
Other Democrats — including U.S. Sen. Elizabeth Warren, D-Massachusetts — have called for forgiving $50,000 in federal student loans. But it seems unlikely that Biden will move that far.
Private student loans aren’t covered. So borrowers still have to pay those. And some will not see even one penny of their federal student loan debt vanish, either.
The yet-to-be announced program could limit student loan debt forgiveness to those who have low to modest earnings.
Biden is expected to forgive up to $10,000 in federal loans per borrower making $125,000 a year or less, according to the NBC report.
More than 43 million people have federal student loan debt in the United States. The average borrower has about $37,000, according to data compiled by the Education Data Initiative. The outstanding federal loan balance is about $1.6 trillion.
About $53.3 billion in federal student loan debt is held by 1.4 million borrowers in Michigan, according to Department of Education data. That data is for outstanding principal and interest balances.
While many are thankful for student loan forgiveness, plenty of anxiety and frustration remains about how exactly such a program will look.
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„If there is an income cap, we are concerned about the borrowers who will be left out,“ said Persis Yu, policy director and managing counsel for the advocacy group Student Borrower Protection Center.
„Income does not equal wealth,“ she said.
One after all, could be making $45,000 a year after college and have some student loan debt but at the same time still benefit from family wealth that has enabled the college graduate to have no credit card debt or other financial burdens.
Income is an imprecise measurement, Yu maintained, to determine the group of people who are most in need of student loan relief.
Yu noted that’s especially the case when you consider the racial wealth gap and the disproportionate burden that Black and Latino student loan borrowers face.
Low-income borrowers also could face hurdles getting relief, she said, depending on what kind of administrative burden is put in place to apply for student loan debt relief.
„We hope that if there is a cap or means test, that relief will be delivered as automatically to as many people as possible,“ Yu said.
Many times, those who owe far smaller amounts had to drop out of school and did not receive the financial benefits of a college degree.
