WASHINGTON (WBEN) - President Biden has previously stated his support for eliminating $10,000 worth of federal student loans per borrower, but student debt cancellation is not outlined in the newly proposed $1.9 trillion COVID stimulus package.
As of now, federal student loan payments are suspended through September 30, and the interest rate remains at 0%.
With the hope of some sort of student loan forgiveness combined with suspended loan payments, what should people with federal student loans be doing during this time?
Jeff Boron works as a college planner for the non-profit Send Your Kids to College, and he notes that any debt forgiveness program would likely only affect federal loans. Boron is of the mindset that if you can continue to make those monthly payments, that's probably the best route.
"If you've got loans through a private lender, you might as well be paying those because I don't think those are going away," said Boron. "If you have loans that are direct loans, federal loans, at this time with the forbearance, I would be paying principle down. There's talks of anywhere between $10,000 to $50,000 in student loan debt (forgiveness), but there's going to be a lot of pushback - I don't think it's going to be as easy as thinking we're just going to pay off student loans."
According to the Federal Reserve, the average college debt among student loan borrowers in the United States is nearly $33,000. There are currently 44.7 million student loan borrowers with total debt of $1.71 trillion. Prior to the moratorium, the average monthly payment was more than $300.
For those with what would be considered a lower amount of student debt, the option to stop paying during the moratorium is even more tempting, with the hope of perhaps not ever having to make another payment.
"I am currently just banking the money that I would normally be putting into paying off my student loans and saving it in the event that we do have to continue paying it off, so that I could put it in as a one-time payment or use it for future payments - keeping in mind the fact that we may not have to actually ever pay back all of it again," said 25-year-old Matt Falkowski, who noted that a $10,000 forgiveness program would wipe out two-thirds of his remaining loans.
"Students are generally graduating, if they took advantage of the federal loans, with about $27,000 of debt, and then maybe some on top of that for private loans," said Boron. "This might be something that's done - let's do $10,000 if they can get that passed - there was talk of up to $50,000, but my gut feeling is that's not likely to happen."
