Debt settlement on student loans is a political hotspot. But regardless of your position, we can all probably agree that college loan debt is a financial burden even for millions of Americans of almost all adult ages.
You may have put off buying a home or starting a family if you are among the 45 million Americans who are paying off college loan debts. If you are heading to 60 and are still paying for second degrees or loans to educate your children, you may not have saved much for retirement.
And among recent graduates, 92 percent of 2016 college graduates who took out a student loan still owe an average of just over $ 30,000, 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.
Regardless of how much you owe, you are probably hoping that there will be permanent federal relief after September 30, 2021, when the loan suspension suspension expires. President Joe Biden campaigned for debt relief but made no provision for college loan relief in his $ 6 trillion federal budget proposal, unveiled last week in May.
That worries some proponents, but others have said it’s a good sign as the president may still be considering an ordinance to wipe out at least $ 10,000 of any loan. That’s less than the $ 50,000 the progressives were pushing for.
Reduce Student Loan Debt All Or $ 50,000?
Obviously, reducing individual student loans by $ 50,000 would put a sizable dent in debt, and that plan is still on the table. Eliminating all of this debt would free these millions of citizens from this financial burden and supposedly open them up to new opportunities for financial growth and stability.
And although loan payments were put on hold until September, it’s important to remember that they still exist. And when the economy fully comes back because of the vaccination of the population, loan payments will resume.
What can you do now?
If you owe money on a student loan, it is a good idea to think about what you will do when loan forgiveness becomes a reality or you have to make the same monthly payment again on October 1st. A few suggestions:
- It’s nice to have that extra money in your bank account every month because you didn’t have to make a loan payment. If you didn’t put that money aside to expect payments to start again in the fall, start now. Indeed, if you can double that shutdown allowance, do so. You have a fair bit of loose change to repay the loan when the loans return to pre-COVID terms. That would be difficult, of course, if you lost a job because of the pandemic.
- If the withdrawal scenario is $ 50,000, your loans may forfeit. The money you put away to reinstate payments can be invested in a retirement plan, a home down payment, or a credit card payment. If you owe much more than $ 50,000, you still have a large part paid off and can use the money you set aside to help.
- In the unlikely event that federal authorities wiped out all of the student loan debt, you can use all of the money you provided to make payments on the student loan as some sort of godsend. To keep those savings from disappearing, keep budgeting the same amount you paid for student loans and making larger payments on other debts, build your emergency fund, save on a down payment on a home, or pay off to your retirement account.
What is the problem?
The arguments against a student loan waiver proposal are numerous, and the arguments come from both sides of the problem.
There are those who suggest that a $ 50,000 forgiveness would not be enough for the many Americans who have six-figure student loans outstanding.
At the same time, there are those who say it is inappropriate to discuss student loan issuance as it punishes all those people who have managed to pay off their loans without the benefit of a government bailout.
The cost of debt relief of $ 50,000 for all applicable cases is estimated at $ 1 trillion. If Biden tried to get an executive order on this 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 issued the loans in the first place.
How the plans developed
During his presidential campaign, Biden suggested that he waive $ 10,000 in student loans for all borrowers, and some members of Congress still support this. But Senator Elizabeth Warren (D-Mass.) Has led a campaign to give all student loan holders a $ 50,000 waiver, while Senator Bernie Sanders (D-Vermont) is firmly committed to the cancellation of all student loan debt.
With the Democratic Party holding a majority in the US House of Representatives and a tiny majority in the US Senate, the atmosphere is best for achieving any of these three goals. However, not all Democrats agree. Biden has asked his education minister to consider the legality of a presidential executive decree to reduce all student loan debt, but there is a possibility that Congress could pass a debt relief bill.
There are other student loan issuance proposals that focus on specific populations:
Considering the age
Twenty years ago, the Government Accountability Office found that 3 percent of households owned by someone age 65 or older have student loans, and that percentage has increased in the 20 years since then. In some cases, these loans are likely to come from returnees for a second degree or from loans taken out for their children’s education.
There is a proposal that the government could cancel all debts for all students aged 65 and over. That would affect roughly 2 million Americans.
Considering the job
As a result of the coronavirus pandemic, there has been a new push to cancel student debts for doctors and nurses or others in the healthcare sector. It is estimated that 1 million healthcare workers would benefit if their student debt were eliminated.
Taking into account the income
It has been proposed to set a maximum level of income for student loan issuance. Some cases involve those who make less than $ 100,000 to $ 125,000 a year, depending on what you read, while others have suggested lending to those who make less than $ 50,000 a year.
There are other ways to get a student loan waiver depending on your occupation or other factors. The US Department of Education provides information on these opportunities, including debt relief, for borrowers with permanent disabilities.
The loan solutions issue for student loan is on hold until October 1st and there may be a lot of discussion about college debt by then. That’s one of the reasons why when you have college debt you need to think about what that amount will be when that date is over. But if you have been able to put those loan payment amounts aside, you are in much better financial shape.
Kent McDill is a seasoned journalist who has specialized in personal finance topics since 2013. He is a contributor for The Penny Hoarder.