Updated: Mar 5, 2022
According to the Federal Reserve Bank of St. Louis, student loan borrowers in the United States owe a collective $1.73 trillion in federal and private student loan debt as of the first quarter of 2021.
Student Loan Data for 2021
-The average monthly student loan payment for the Class of 2021 will be $433.
-The average student loan debt per borrower at graduation will be $36,900.
-Student loan debt at graduation has increased 76% since the Class of 2000, a growth rate that outpaces the rate of inflation by 41%. -After adjusting for inflation, the average student loan debt at graduation has increased 326% since 1970.
-Since 2003, the national total student loan debt balance has grown by 602.5%.
Student Loan Forgiveness
Public Service Loan Forgiveness is a federal program designed to encourage students to enter relatively low-paying careers like firefighting, teaching, government, nursing, public interest law and the military.
You must make 10 year’s worth of payments while working for the government or a nonprofit before qualifying for tax-free forgiveness.
Joe Biden’s Campaign Promise
For the significant chunk of the nation’s student loan debt Biden campaigned to give $10,000 in relief for every borrower. As of 5/24/2021 nothing has been accomplished.
Meanwhile, an answer to a bigger question could come as early as next week: Does the president have the executive power to wipe out student debt? That would give millions of Americans a much smaller overall debt load.
Student Loan Deferment Extended
Before the pandemic, 80% of Americans with federal student loans "were either unable to pay, or were paying but their balances were going up," writes Alan Collinge, who launched the petition and founded a group called Student Loan Justice in 2005. As of this podcast requiring student loan payments been halted (if opted) through September 30, 2021 (Along with 0% interest)
Biden has been pressured by progressives in the Democrat Party from the likes of Chuck Schumer, Elizabeth Warren and Alexandria Ocasio-Cortez to forgive up to $50,000 in debt. On 5/21/2021, from an interview with the New York Times last Friday, Biden has grown suspicious of canceling the debt. He and his staff have indicated that they’d prefer to have Congress create legislation to provide student loan relief rather than using an executive order.
Questions to Consider
How do you determine who qualifies for the forgiveness it is offered for the $10,000 - $50,000 range?
On top of canceling student loan debt, Biden has proposed free undergraduate tuition for students who meet certain requirements. Household income needs to be below $125,000 per year to qualify for two and four-year public colleges and universities; however, this does not include private schools. One exception is for those that attend a private historically black college or university (HBCU) or a minority-serving institution (MSI).
Who Would Receive Student Loan Forgiveness?
What about Parent Plus Loans?
Is it for people who are currently paying?
Is it for those that are in school but haven’t graduated?
Does anyone that has paid in the past get relief?
There are around 20 million college students in the U.S., and campus diversity is increasing.
NerdWallet Statistics on outstanding loans
Direct Loans $1.32 trillion 35.9 million borrowers
FFEL Loans $245.9 billion 11.0 million borrowers
Perkins Loans $5.2 billion 1.7 million borrowers
Total (All Federal) $1.57 trillion 42.9 million borrowers
Roughly 110 million borrowers x $10,000 = 1,100,000,000,000. That’s a quadrillion. The government does not have this money to forgive debt to students and pay companies that are financing debt.
Student Loan Repayment Options Under Biden’s Plan
Biden’s plan is liberal; one who makes less than $25,000 or less annually would not have to pay for their schooling. For those that exceed $25,000, the repayment for federal student loans would use a 5% ratio that looks at discretionary income. (This is income less taxes and essential spending, including items such as housing and food)
Then after 20 years the remainder of the loans would be forgiven, and there would be no income tax assessed on the forgiven loan amount.
Keep in mind there are 17 states that already offer tuition-free community college programs.
Student Loan Finance Tips Recap
#1 Pay your student loans even with temporary forgiveness if you have the means to do so otherwise you are just extending what you owe. #2 If you have excess money from your tuition, room and board and books, refrain from spending that money on other items, especially non-essential living expenses such as food and coffee and the like . Getting into this habit will lead you to borrowing additional money.
If you are waiting on the government to provide forgiveness money, don’t bank on it. Passing legislation can take years-to-months and this is not guarantee that any money will be provided.
If you are in a budget grind know that if you file bankruptcy, student loans cannot be forgiven. Secondly, if you stop making payments the government can and has garnished social security paychecks.
As always, make sure that you follow a budget and focus on more essential items for your monthly living. For most people, there are opportunities to cut back on spending. It is important to look at your future goals.