COLUMBUS, Ohio — Since President Joe Biden announced a plan to forgive up to $20,000 in student loan debt for those who qualify, many have been wondering what their next move is.
Akii Butler, a 2019 Kent State University graduate, was thrilled to hear many loans would be forgiven because he has nearly $32,000 in school debt.
What do you want to know
- On Wednesday, President Biden announced the cancellation of federal student loans and outlined an income-driven repayment plan
- Borrowers with Pell Grants who earn less than $125,000 per year may qualify for a rebate of up to $20,000; up to $10,000 for those without the grant
- Federal loan repayment freeze extended until January 1, 2023
- Biden has proposed a rule creating a new income-based payment plan that would allow borrowers to pay no more than 5% of their monthly income on undergraduate loans
“Although I’m happy with the $20,000, I’ve seen it say up to $20,000 and I’m like ‘wait,'” Butler said. “So there’s a chance you’ll give me $15,000 instead of $20,000. I’m like, come on, let’s just do $20,000.
Since Butler is a Pell Grant recipient and earns less than $125,000 a year, he could qualify for a $20,000 reduction in his school loan debt, under the new plan. Borrowers who are not Pell Grant recipients and earn less than $125,000 per year may qualify for a $10,000 rebate.
Butler, who works for a nonprofit, said it was a good start.
“There are some things I would add in terms of the interest and responsibility of certain institutions for their predatory practices, but I think it’s a step in the right direction,” he said.
The Biden administration is proposing a rule to create a new income-based payment plan that would allow borrowers to pay no more than 5% of their monthly income on undergraduate loans. Butler is also encouraged by the news that loan balances of $12,000 or less will be forgiven after 10 years of payments, instead of 20 years.
“If I’m on the income-based repayment plan, that lower interest actually gives me a chance to hit the principal and not just barely scratch the interest,” he said.
Primerica investment adviser Christian Cox said the discount plan will help people save between $100 and $150 a month. He said the relief can help people make better financial decisions, like investing in an emergency fund.
“It’s not really if emergencies are going to happen, it’s just how often,” Cox said. “We have to be ready for this stuff. But they could also use it to invest in their retirement or even just to pay off their other loans faster.
Although federal loan payments won’t resume until Jan. 1, he said there will be deferred interest that will have to be paid then.
“I encouraged people to, if you can pay it now, pay it before the bill is due. The interest will come back,” Cox said.
All things considered, Butler said he now feels more comfortable moving forward with his loan situation.
“Hearing that they’re going to try to fix interest rates and do things like that gives me hope,” he said.
More information on whether someone is a Pell Grant recipient can be found by visiting the Federal Student Aid website.