Federal student loan debt burden hits Gen X and Baby Boomers, not just Gen Y
Just hours after new President Biden signed his first 17 executive orders, one emerged as a change on the Federal Student Loan website: “On January 20, 2021, the COVID-19 emergency relief measures were extended on [US Education Department]- federal student loans until September 30, 2021.
This brings the total to 18 months that federal student loan holders will not have been charged interest and will be able to take this time as forbearance, meaning they will not have to make any payments. In October 2020, it was reported that only 11% of borrowers continued to repay their federal student loans, taking advantage of the zero interest rate to allocate all of their payments to the principal.
President Biden plans to forgive up to $ 10,000 at all levels for every federal student loan borrower, which was part of his campaign platform. (This discount does not apply to those with private loans.) Biden also offers a change to the Public Service Loan forgiveness program (PSLF), replacing the cancellation of student debt for public and nonprofit employees after 120 payments with a remission of $ 10,000 per year in regular payments for a period of five years. Although those who participate in the existing program do not see the benefit for 10 years, there is no maximum for the amount forgiven; the proposed plan would cap at $ 50,000.
There have been calls for cancel all federal education debts; the burden on individuals affects their spending and the US economy in general by postponing home purchases, hampering the growth of small businesses and reducing savings. A bill, HR3448, presented at the previous session of Congress by Representative Ilhan Omar (D-MN), called for debt cancellation on all outstanding federal student loans. The bill, which has yet to be reintroduced in the current session of Congress, would require the United States Secretary of Education to waive the balance and interest on loans made by the student or by a parent or borrower in the United States. name of the student 180 days after passing.
A $ 50,000 debt forgiveness option also rebounded. At the previous convention last December, Omar and his representatives Ayanna Pressley (D-MA), Maxine Waters (D-CA) and Alma Adams (D-NC) presented a resolution which outlines the way forward for President Biden to use executive power to write off $ 50,000 and ensure that debt forgiveness does not create income tax for the borrower. A complementary measure, Senate Resolution 711, was also introduced in the last session by Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA).
In November, NPQ reported on an open letter from 238 organizations who called on Biden after his inauguration to cancel all student loans, due to the drag that growing student debt has become on the economy, especially in communities of color, even before the COVID-19 pandemic. The letter points out that canceling their parents’ federal student loan would minimize the damage to the next generation.
It would also help older borrowers. It’s not just 25 to 35 year old borrowers who have student loans; there are retirees, some living on Social Security, who are still paying off federal loans, which can have an interest rate of six percent. Schumer and Senator Elizabeth Warren (D-MA) published an editorial which was published by CNBC last Friday, arguing for the government’s forgiveness of $ 50,000 in federal school loans. They point out that there are elderly people who have student debt for themselves or for a loved one.
Student loan debt in the United States is $ 1.68 trillion, and not all student loan borrowers are young. Data from US Department of Education of the $ 1.566 billion held by the federal government (there is still over $ 100 billion held by private lenders) show that 18.6% of borrowers holding 22% of all debt are over 50 years old. The average debt of people aged 50 and 61 is over $ 42,000, and for those over 62 it is still over $ 38,000.
The number of older Americans with student debt has increased. American Association of Retired Persons (AARP) reports that in 2004, adults aged 50 and over had $ 47 billion in student debt; just 14 years later, that figure has jumped to $ 289.5 billion. And today, the federal government reports that number has risen to $ 349 billion. This includes non-traditional adult learners who have returned to school and parents and grandparents who have borrowed to send dependents to university.
Yes retirees perceiving the lack of social security on these student loans, their benefits can be foreclosed, greatly reducing their income. In 2016, Warren and former Missouri Senator Claire McCaskill published a report which found that over 70 percent of those foreclosed payments were still going towards interest and fees and did not reduce the loan principal.
It appears that those who would benefit from a federal student loan waiver amount include all ages, children, whose parents may be pressed for school loans which can affect housing and other needs of the whole family, seniors on fixed incomes. The loan cancellation would benefit those who have to pay student loans even though they did not graduate, and it would benefit people who attended university later in life when it fit their job and didn’t. can now retire because of debt. — Marian Conway
Disclosure: The writer has a federal student loan, participates in the Civil Service Loan Forgiveness Program and is 65 years old.