The clock is winding down until federal student loan payments are set to resume and President Joe Biden has yet to make a concrete decision on widespread student loan debt forgiveness.
If no action is taken by Congress of Biden, be expected to resume payments on September 1st.
The interest-free student loan payment pause is in its third year. At this point many borrowers are thinking if 0% interest on student loans is a preferable option.
Typically, federal borrowers pay between 2% to nearly 7% on their student debt, and if this rate continues, borrowers could save around $1.5 billion per month in interest. That means, any payment made over the past year would have gone toward the principal balance of the loan, allowing borrowers to make progress on reducing their debt to a reasonable amount.
With the payment moratorium set to expire, inflation at an all-time high, and midterm elections around the corner, several members of Congress are considering and zero percent interests rates to be an alternative.
“The administration has had such a difficult time with the economy. There is a reason why he might be kicking that can down the road a little bit closer to midterms,” said Brannon Lloyd, Founder of The College Money Guys, a college planning company. “Right now, student loans are at zero because of COVID and I do think that it will continue for a while.”
Lloyd says that zero interest rates come at a cost, and it would most likely fall on the backs of taxpayers for the loss of government revenue. Paying tax dollars towards subsidized rates for college students isn’t a problem for Lloyd personally, he believes forgiveness adds more to the national debt at a time when the country can’t afford to do so.
“This is why College Money Guys works with students and families to avoid student debt entirely,” Lloyd said. “Most employers look at internships and work experience versus where you went to school, so we are very strategic with where our students go to college. The issue of student debt doesn’t end with cancelations, its more complex than that.”
The Defender asked student loan borrowers on social media their thoughts about this proposal. Here is what you all had to say.
I cover Houston's education system as it relates to the Black community for the Defender as a Report for America corps member. I'm a multimedia journalist and have reported on social, cultural, lifestyle,...
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