HIGHLAND HEIGHTS, Ky. (FOX19) – Just hours after his inaugural address, President Joe Biden swiftly signed 17 executive orders, one of which is to order the Department of Education to extend the current hiatus on loan payments federal students.
The freeze on those payments and interest now extends through October as part of the federal government’s COVID-19 response, but only applies to federal student loans.
Before President Biden signed this decree on student loans, payments were due to resume in late January.
At the University of Northern Kentucky, economics professor Dr. Linda Dynan addresses last year’s record nearly $ 1.6 trillion in federal student debt according to the Federal Reserve Bank of New York .
“A lot of it is graduate student debt that won’t be affected by this. Medical school, law school, all of those things have skyrocketed, even from undergraduate level, but these are people that we shouldn’t be too worried about because they’re actually going to be earning some income that supports that. The big question really is with people on the other end going into debt, not completing their degrees and having no way to pay it back, ”Dynan said.
During his campaign, Biden supported the cancellation of $ 10,000 in federal student loan debt per person and it remains to be seen whether this legislation will be passed by Congress.
Biden also supports an income-based repayment plan that includes an option for Americans earning more than $ 25,000 per year.
They could spend five percent of their income on loans, and after 20 years that would be forgiven.
“From that point of view it makes a lot more sense, when we say we tie the amount of forgiveness to the amount of a family or student’s income, then we can really direct the money where it is.” necessary, ”adds Dynan.
Meanwhile, at UC, the executive director of the Kautz-Uible Economics Institute at the Carl H. Lindner College of Business insists on one thing to keep in mind: historically low interest rates.
Interest rates on federal student loans were lower than ever last year.
“If you have this student loan debt, it might be a good idea to consolidate and refinance your current student loans to take advantage of these low interest rates. In terms of how that will affect the local economy, there are about 15% of students who have some form of student debt, so for those people it will have a huge impact. The average monthly payment is just over $ 200, so suspending these payments will provide some economic relief for these people, ”Jones said.
Another piece of advice from Jones is to reiterate who qualifies under this decree from Biden.
It focuses on refinancing or consolidating your loans through the federal government or through a private lender.
“If you’ve been through a private institution or a bank, you won’t be eligible for the suspension of student loans and interest until October,” Jones adds.
In 2020, according to Brookings Research, one in four adults, or nearly 45 million Americans, owed student loans.
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