From debt forgiveness to repayments resuming, here's what you should know about student loan changes
In the tri-state area, 3,150,000 people owe a whopping $112 billion in student loan debt.
PHILADELPHIA (WPVI) -- Right now $1.7 trillion in student loan debt is outstanding nationwide.
Our 6abc data team crunched the numbers and this is what they reveal about student loan debt in the tri-state area: 3,150,000 people owe a whopping $112 billion in student loan debt.
Pamela Walters of Bear, Delaware talked to Action News about her loans.
"A couple I've paid off and this one is just lingering. Throughout the years, it just grew and grew and grew. I guess because of interest and because of the fact that I had taken some forbearances," she said.
Financial analyst and advisor Chuck Minnich of Foundation Capital Management, LLC says the amount of interest that borrowers accrue is staggering, and the federal government recently announced interest rates have gone up for new student loans by one and one-quarter percent.
"That may not seem like a lot on the surface, and in nominal terms it's not, but everything's relative. That's a 33% increase in your student loan interest rate," said Minnich.
Minnich says this comes at a time when "prior to the pandemic, ten million borrowers were already behind on their payments and there were three million borrowers that had balances of over $100,000, which basically is having a mortgage without having the house."
Payments have been on a pandemic pause for two years, but unless the government puts a seventh extension in place, borrowers will have to resume paying in less than two months on September 1.
"People need to be aware of what their options are because there are repayment plans," said Minnich.
He tells Action News there are income-based repayment plans, standard repayment plans for 10 years, graduated plans where payment amounts start out small and then get bigger, and extended payment plans for up to 25 years.
"You'll pay much more interest, but if it allows you to make your payments, it's an option," warns Minnich.
In the meantime, President Biden has pledged to forgive $10,000 of student debt per person.
"If that does go through, it's basically a $320 billion stimulus program at a time when inflation is at a 40-year high. So, if they're able to pass the student loan forgiveness, then they're more than likely to allow the student payments to start up again because that'll help balance some of that stimulus. If they're not able to pass it, then they're more than likely going to extend it till the end of the year. But all borrowers should be prepared for the possibility that payments are going to resume in September," said Minnich.
There are already instances in which student loans are forgiven. The government is looking at changes to those existing programs so more people and more payments would qualify. Those proposals are open to public comment right now.
For more information on all the sweeping changes that the Biden administration is proposing on the "broken" student loan program, CLICK HERE and CLICK HERE.
