President Biden on Wednesday announced $10,000-$20,000 in student loan forgiveness, fulfilling a 2020 presidential campaign promise. (Wikimedia Commons)
44 Million student loan borrowers in the United States are carrying an estimated total of $1.7 trillion dollars in student loan debt.
Some borrowers have already received student loan relief. President Joe Biden has already discharged about 32 billion dollars' worth, most recently cancelling 3.9 billion for former ITT Technical Institute students.
On Wednesday, Biden announced a plan to discharge $10,000 in student loan debt for borrowers making less than $125,000 a year. The amount for Pell Grant borrowers is $20,000. The relief plan includes an extension of the current pandemic -generated payment pause through Dec. 31, 2022
Ben Kauffman is the director of research and Investigations for the nonprofit Student Borrower Protection Center, in Washington, D.C. He sees the effects of student loan debt across the country. Kauffman said in Indiana alone there are 900,000 student loan borrowers carrying a collective debt of $30 billion. And, one in six rural borrowers have fallen behind.
“And when you look under the hood, there's more than 83,000 borrowers who are delinquent or in default on about 1.8 billion -- with a B -- dollars of student loan debt,” Kauffman said. “So that affects every area of their life, you know, when you owe on a massive student loan burden, it affects your ability to buy a home, you can't save for retirement, you can't have an emergency fund, you can't save for your kids to go to school. Anything that goes wrong in your life gets amplified.”
Kauffman said the impact of student loan debt ripples through state and local economies.
“We see evidence that when folks have student loan debt, they can't go and start that community business, they can't go take a risk in their career that could help them and that can grow the entire economy. What we've done is we've created a system that just makes the American Dream totally inaccessible for huge swathes of people.”
Aubrey Kearney’s American Dream involves getting married, owning a home and -- most importantly – babies. But Kearney said knowing she’ll be making student loan payments of $350 to $450 a month for decades deeply influences planning for life with her partner.
“It’s a 60 grand behemoth that hangs over us,” she said.
They chose to buy a home over getting married. The 29-year-old sees both the home and her education as important investments – she said she needed her degrees to be able to do what she’s best at. But the burden of long-term student loan debt is still daunting.
“In 15 years, this house will be paid off but I will still be in student loan debt,” she said.
Kearney and her partner plan to marry eventually. But she said it doesn’t feel like it’s possible to be financially secure enough to raise a child and carry student loan debt at the same time.
“And it’s painful every day I’m not a mom,” she said. “I want to be a mom so bad and it just feels like maybe it can't even happen, and that's really sad and scary.”
Kearney garnered scholarships and grants for her undergraduate degree at a private college. But the scholarship was conditional -- she needed to live on campus. So she accumulated around $20,000 in loan debt just for lodging. Add on the cost of a graduate degree from IU and her student loan debt more than tripled.
When asked about the potential impact of $10,000 in student loan forgiveness from President Biden, Kearney said it would put a small dent in her roughly $60,000 loan balance.
“But what I can say is like when we do the math about how much childcare costs a year, it's more than $10,000,” she said. “So, you know, it would help, but I think it doesn't undo the damage.”
Some borrowers can receive forgiveness through the federal Public Service Loan Forgiveness Program (PSLF). Under this program, borrowers working public service jobs carrying qualifying student loans must make 120 qualifying payments in an income-based repayment plan. Fraught with inaccuracy and inefficiency, the Department of Education recently revamped the program.
Cory Bougher graduated from IU in 2005 with an undergraduate degree and $17,000 in debt, despite the fact that, like Kearney, she had grants and scholarships. Bougher went on to teach high school in Florida and, to boost her income potential, she got an education related master’s degree in 2009.
Graduating in The Great Recession meant cobbling together multiple low paying jobs. Her car was repossessed, and at times she was homeless. She filed for bankruptcy in 2011, but since 2005, neither federal nor private student loan debt is dischargeable.
By 2012 she was back in Indiana, employed full time and paying on her loans through the federal Public Service Loan Forgiveness program. But in the required income-based repayment, her debt has only grown.
“My actual balance is only $40,000. But I owe $13,000 in just interest, which is almost what my total undergrad [loan debt] was.”
Ten years on, she has a partner and two kids. She said her student loan debt means she’s always a renter, never a homeowner.
“I'm going to be 40 this year so I'm getting to that age where if I was to buy a house with a 30-year mortgage, I may not live long enough for that,” she said.
For now, she must stay in a southern Indiana where her rent is affordable.
“I've actually turned down a job offer this year because they needed me to move to one of the most expensive areas of Indiana and the pay wasn't going to cover that,"she said. "I have turned down other jobs because I can't move from where I'm at now.”
Bougher is underwhelmed by Biden’s latest loan forgiveness plan. The $10,000 won’t cover the $13,000 of interest accrued on her loans. She once had Pell Grants but isn’t sure if she’s eligible for the $20,000 forgiveness given Pell Grant borrowers because she consolidated her loans when she went into the PSLF program. She has nearly completed the required 120 payments anyway, after which she’ll apply to have her remaining balance forgiven – hopefully this fall.
