What this means for borrowers after the sixth extension of the federal student loan payment break | Central Missouri News
COLOMBIA — President Joe Biden on Wednesday announced a sixth extension to the student loan payment pause and interest relief, this time through September.
According to the Federal Reserve, Americans owe more than $1.7 trillion in student loan debt, more than they owe on credit cards or auto loans. This extension has brought significant relief to more than 40 million borrowers.
“It will certainly help people who are dealing with the effects of inflation and rising prices elsewhere,” said Marty Steffens, chair of the financial reporting chair and professor at the Missouri School of Journalism. “It gives them some breathing room until they can make those payments again.”
The Committee for a Responsible Federal Budget estimates that canceling all federal student loan debt would cost about $1.6 trillion, and canceling $10,000 per borrower would cost between $210 billion and $280 billion.
However, Steffens said the extension and potential cancellation could also help stimulate the economy.
“Even if they would lose a bit, there would be a resultant backlash from people buying big decisions and major life goals, like buying a house or buying a car when they have that kind of forgiveness,” Steffens said. .
This is the sixth extension of the break. For some borrowers, it was different from the first time.
Molly Jones got over $20,000 in student loans in 2015. Now she still has about $15,000 to pay. For Jones, the first break was a huge relief as she lost her job at the start of the pandemic.
“I was a little terrified and hearing that I wouldn’t have to make those payments was a huge relief,” Jones said.
But it was a different feeling when she heard the same news six times.
“Now it’s kind of like business as usual,” Jones said.
President Biden promised to set aside $10,000 for borrowers during his election campaign. Now he is under enormous pressure to cancel his student debt.
Whether to pay those student loans during that time is a game of chance for Jones. She has decided not to repay the loan for the time being, even though interest ceased to accrue and overdue debt collections were suspended.
“If those could go away, that would be great. And then I’ll save even more money. If they don’t, I can still afford the payments with the interest rates. It’s kind of betting,” Jones said.
However, for Kelly Wilson, she didn’t believe the loan forgiveness would happen.
“I find it hard to believe it will actually be cancelled. I want it,” Wilson said. “And again, not just for me, you know, but I’m having a hard time seeing that happening.”
Steffens suggests that people could take advantage of the interest-free opportunity to pay off their student loans.
“Pay off some of your student loans if you can. And then when payments resume, you’ll pay, you’ll have a significantly lower principal amount that you owe interest on,” Steffens said.