COLUMBUS, Ohio — Since President Joe Biden announced a plan to forgive as much as $20,000 in student loan debt for those that qualify, many are wondering what their next move is.
Akii Butler, a 2019 Kent State University Graduate, was excited when he heard the news that many loans would be forgiven, because he has nearly $32,000 in school loan debt.
What You Need To Know
- On Wednesday, President Biden announced federal student loan forgiveness and outlined an income-driven repayment plan
- Borrowers with Pell grants who make less than $125,000 a year may be eligible to get up to $20,000 forgiven; up to $10,000 for those without the grant
- Freeze on federal loan payments extended to January 1, 2023
- Biden proposed a rule creating a new Income-Driven Payment Plan which would allow borrowers to pay no more than 5 percent of their monthly income on undergraduate loans
“While I’m happy with the $20K, I saw it say up to $20K and I’m like ‘wait,’” said Butler. “So there’s a chance you would give me $15K instead of $20K. I’m like, come on, let’s just make it $20,000.”
With Butler being a Pell grant recipient, and making less than $125,000 per year, he may be eligible to get as much as $20,000 off his school loan debt, according to the new plan. Borrowers who aren’t Pell grant recipients, and make less than $125,000 a year, may be eligible to get $10,000 off.
Butler, who works for a nonprofit, said it is a good start.
“There are some things that I would add when it comes to interest and holding certain institutions accountable 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-Driven Payment Plan which 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 am on the income-based repayment plan, that lower interest actually gives me a chance to get to the principal and not just me barely scraping off the interest,” he said.
Primerica investment adviser Christian Cox said the forgiveness plan will help people save between $100 to $150 per 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,” said Cox. “We have to be ready for that stuff. But they also could be using that to invest in their retirement or even just to pay off their other loans faster.”
Although federal loan payments don’t resume until Jan. 1, he said there will be delayed interest that will need to be paid then.
“I’ve been encouraging people to, if you can pay it now, pay it before that bill becomes due. The interest will go back,” said Cox.
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 the interest rates and do things like that, that gives me hope,” he said.
More information on if someone is a Pell grant recipient may be found by visiting the Federal Student Aid website.