Student loan debt repayment is a political hot button. But whatever your position, we can probably all agree that college loan debt itself is a financial burden on millions of Americans at nearly all adult age levels.
Maybe you’ve put off buying a home or starting a family if you’re one of the 45 million Americans paying off their student loans. If you are heading towards 60 and are still paying a second degree or loans you took out for the education of your children, you may not have saved much for retirement.
And of recent college graduates, 92 percent of 2016 class graduates who took out student loans still owe just over $ 30,000 on average, according to the National Center for Education Statistics. The Federal Reserve estimates that student loan debt was $ 1.7 trillion at the end of 2020.
However much you owe, you probably hope that after September 30, 2021, when the suspension of loan disbursements expires. But hope isn’t a plan, is it? And the fact that President Joe Biden did not mention student loan forgiveness in his State of the Union address on April 28 makes us wonder if any forgiveness proposal will become reality.
Reduce Student Loan Debt, All or $ 50,000?
Obviously, cutting individual student loans by $ 50,000 would make a big dent in what is owed, and that plan is still on the table. Getting rid of all this debt would release those millions of citizens from that financial burden and reportedly open them to new opportunities for financial growth and stability.
And while loan payments have been suspended through September, it’s important to remember that they still exist. And when the economy returns fully and the population receives vaccinations, the loan payments will start again.
What can you do now?
If you owe money for a student loan, think about what to do if loan forgiveness becomes a reality or if you make the same monthly payment again on October 1. Some suggestions:
It was nice having that extra money in your bank account every month because you didn’t have to pay a loan. If you haven’t put that money aside while waiting for the payments to start again in the fall, start now. In fact, if you can double that fallow money, then do it. You will be given a good bit of change to pay off the loan if the loans revert to pre-COVID terms. Of course, this would be difficult if you lost a job due to the pandemic.
If the $ 50,000 payout scenario succeeds, your loans could be wiped out. The money you save, meant for recovered payments, can be invested in a retirement plan, used for a home’s down payment, or to pay for a credit card. If you owe a lot more than $ 50,000, you still have a large portion paid off and can add to that with the money you have set aside.
In the unlikely event that the FBI has wiped out all student loan debt, you can use whatever money you’ve set aside for student loan payments as some kind of windfall. To keep those savings from disappearing, keep setting aside the same amount you paid for student loans and make larger payments for other debts, build your emergency fund, save for a down payment on a home, or contribute it to your retirement account .
What’s the problem?
There are numerous arguments against any proposal regarding student loan forgiveness, and the arguments come from both sides of the issue.
There are those who point out that a $ 50,000 forgiveness would not be enough for the many Americans who have outstanding student loans in the six-figure range.
At the same time, there are those who say it is inappropriate to discuss student loan forgiveness because it punishes all those people who managed to pay off their loans without the benefit of a federal bailout.
The cost of the $ 50,000 waiver for all applicable cases is estimated at $ 1 trillion. If Biden attempted to issue an executive order on such a scale, it would be the most expensive executive order ever issued, and it would likely face legal challenges, and not just from the for-profit companies that own the loans at all issued.
How the plans evolved
During his presidential campaign, Biden suggested that he push for $ 10,000 in student loan forgiveness for all borrowers and some members of Congress still support this. But Senator Elizabeth Warren (D-Mass.) Has spearheaded a campaign to grant a $ 50,000 waiver to all student loan holders, while Senator Bernie Sanders (D-Vermont) has vigorously worked to cancel all debts of student loans.
With the Democratic Party holding the majority in the US House of Representatives and a slim majority in the US Senate, the atmosphere for achieving any of those three goals is at its best. However, not all Democrats agree. Biden has asked his education secretary to determine the legality of a presidential executive order to reduce all student loan debt, but there’s a possibility that Congress could pass a debt cancellation bill.
OF THE DEBT FORUM
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There are other suggestions regarding student loan forgiveness, centered around specific segments of the population:
Considering its age
Twenty years ago, the Government Accountability Office determined that 3 percent of households headed by a person 65 or older have a student loan balance, and that percentage has increased in the 20 years since. In some cases, these loans are likely to come from people returning to school for a second grade or from loans taken out for their children’s education.
It is suggested that the government could forgive all student debts for anyone 65 or older. That would affect about 2 million Americans.
As a result of the coronavirus pandemic, a new impetus has emerged to forgive student debt to doctors and nurses or others in healthcare. It is estimated that there are 1 million health workers who would benefit if their student debt were wiped out.
It has been proposed to set a maximum income level for student loan forgiveness. In some cases, the conversation turns to those who make less than $ 100,000 to $ 125,000 a year, depending on what you read, while others have suggested forgiveness for loans to those who make less than $ 50,000 a year.
There are other ways to get student loan forgiveness depending on a person’s occupation or other factors. The United States Department of Education offers information about those opportunities, and also about debt relief for borrowers with permanent disabilities.
The question about student loan loans has been suspended until Oct. 1, and there can be a lot of debate about college debt between now and then. That’s part of the reason that if you have student debt, you need to think about what that amount will be as that date approaches. But if you’ve been able to put those installment amounts aside, you’re much better off financially.
Kent McDill is an accomplished journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.
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