TEXAS, USA — Congrats on the degree. But sorry about all the IOUs attached to it.
Borrowing to pay for school has put this country’s college and university students and graduates in a credit crunch class all their own. Their collective $1.59 trillion in student loan debt is more than Americans owe for auto loans, and it’s almost twice the total national credit card balance.
Many people have taken out student loans in pursuit of a brighter future, but it may dim considerably when they realize that the average student debt (at 6% average interest) includes $26,000 in interest that accrues over the 20 years the average school loan takes to pay off.
But for millions of Americans, a glimmer of hope returned with recent talk that President Biden may cancel some student loan debt. But for some, the optimism dimmed again with the possibility that the president could cancel 'only' $10,000 in student loans per borrower. That’s much less than many people have been calling for; in fact, the headline quoting one borrower was ’Cancel it all or do nothing’.
A lot of Texans with student loan debt might show up to debate class to argue that one.
One analysis found that 1,157,540 Texans would have their federal school loan debt totally erased if $10,000 per borrower is forgiven. The analysis also found that nationwide, canceling that amount would completely clear the debt owed by one-third of all Americans who owe on federal student loans.
Still, some want more.
There has been a lot of reporting on what might happen. We’ll see if it’s $10,000 or $50,000…or if there isn’t broad forgiveness at all. Most reporting has centered around the expectation that the president will make an announcement in July, or more likely, in August.
That timing would make sense. Due to the pandemic, interest stopped accruing and payments on federal student loans were paused on March 13, 2020. Starting this September, borrowers will once again have to start making their student loan payments.
Side note: The pause in student loan repayments has meant that there haven’t been chances for borrowers to miss payments or to be delinquent, and that has improved some credit scores of borrowers. You can get free credit reports to check your score here.
There are some important details to know about repayments resuming. For most borrowers, the interest rate will be the same as it was before the pause in payments.
If you previously paid by auto draft, you may have to opt back in to get those automatic debits started again. And if you can’t afford to resume paying your monthly amount from before, you should be talking to your loan servicer now or applying for an income driven repayment plan.
This article has more useful tips about student loan repayment.