Federal student loans have been on the minds of nearly every voter, politician, parent, and student for decades. Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez focused on student loans while supporting candidates and running for re-election themselves. The cancellation of student loan debt has often been seen as a Democratic problem, a blue problem, a socialist talking point. However, it is clear that loans affect most college students, both undergraduate and graduate.
Federal student loans are defined as money borrowed directly from the federal government. There are different types of federal loans, including subsidized direct loans, direct non-subsidized loans, direct PLUS loans and direct consolidation loans. Each of these types of loans have different interest rates and repayment periods.
When the first COVID-19 relief bill was passed by Congress in March 2020, the the interest rate on federal student loans has been set at zero percent. It’s been called the federal moratorium on student loan debt, and it means borrowers haven’t accrued interest on their loans during the pandemic. It was seen as a relief from financial hardship, one less thing to think about if you lost your job or suffered a cut in pay for a period of time due to the pandemic. The bill also provided for a remission in the event of late payment. In other words, there was no financial consequence for not repaying your federal student loans for 18 months. On August 6, this freeze on student loan repayments was extended until January 31, 2022. Coming after several more extensions, this will be the last extension, giving borrowers six months to find the resources they need to pursue federal student loan repayments.
The moratorium, however, has not affected private student loans granted to students and their families by companies like Sallie Mae, private banks like Chase, or credit card companies like Discover. While federal loans are affected by the Biden administration’s relief plans and federal programs such as Public service loan remission, private loans are beyond the control of the federal government for most accounts. However, for a country with about $ 1.8 trillion in outstanding student debt, most of which is federal loans, these policies have had an impact.
In the Kalamazoo College community, it should be noted that Federal Student Loans affected 77.4% of the 31 current students and alumni who responded to a self-selected survey conducted by Index in August 2021. Almost 36% of them said they only have a three-in-five understanding of federal student loans in general, and 66% of those who took out federal student loans said they did not. couldn’t have dated K without them. Loans are important for the payment of undergraduate tuition fees, the cost of which is on the rise, and the K community is no exception.
From the new class of freshmen at Kalamazoo College in fall 2020, 57% of students took out federal student loans, and of all students attending K last year, 70% of students received financial aid. This includes private loans, scholarships, grants, federal aid, and non-need-based financial aid. The sticker price for tuition fees last year was $ 53,976, which did not include fees like registration for early years and student activities or room and board. Even when most students receive some form of financial aid, it comes at a high cost, and students are often in debt for years after graduation. According to US News, the an average K graduate has $ 24,500 in federal student loan debt. In the self-selected survey, 41% of students who took out federal student loans said it would take or took them six to ten years to pay off their loans. Five people even said it would take them over ten years, the average repayment period without refinancing, to pay off their federal student loans associated with an undergraduate degree at Kalamazoo College. In short, the financial burden of college is going to stay with most of us for years to come, and that burden increases if graduates pursue lower paying jobs or expensive graduate programs.
The federal moratorium on student loan repayments positively affected 48% of students and alumni who responded to our survey, yet 64% also said they knew nothing or were only vaguely aware of the moratorium. Many of us have been forced to take out federal student loans or face a crippling financial burden, but information on those same loans is hard to come by. Unless you actively research student loan information, this information is buried in jargon that is difficult to understand. Even if one understands their loan agreements, paying them off is a whole different story, especially during a global pandemic.
August 26, The Department of Education announced that the cancellation of federal student loans exceeded $ 9.5 billion for defrauded and disabled students. This includes many students who have taken out loans to attend for-profit colleges such as the ITT Technical Institute. The hope of this discount is to reduce defaults, which occur when borrowers are unable to meet their repayment deadlines. Other members of Congress, including Senator Elizabeth Warren and Senate Majority Leader Chuck Schumer, are pressuring President Biden to go further and write off more than $ 50,000 in debt per borrower; the president continues to set his limit at $ 10,000 per borrower. Whatever the extent of the cancellation of student debt, it is certain that continue economic stimulation as more and more people are turning their loan repayment funds into retirement funds and housing. Less student loan debt means less debt overall, which means a positive turn for our economy, which continues to suffer from COVID-19 and its variants.