How to prepare for possible student loan forgiveness
LINCOLN, Neb. (KLKN) – Nebraskans alone have racked up over $7 billion in student loan debt.
That means each borrower in Nebraska on average owes around $32,000.
The payment pause has been extended through August by the Biden administration, but many wonder what happens after that.
“We will know shortly, probably within the next 90 days, if they are going to extend, if they are going to do forgiveness or if they are going to continue to kick the can down the road,” said Mary Jo Terry, managing partner at Yrefy, a company that refinances defaulted private student loans.
Borrower Liz Sizer said she was happy about the continuation of the student loan moratorium.
“It gives me more time,” she said.
The last two years have been trying times, and many may have reallocated money they would have used to pay down their loans to things like household expenses.
And many are hopeful that some kind of loan forgiveness will happen soon.
“It would be really nice if we actually saw some of that come to pass here in the near future,” Sizer said. “Those of us that have been serving the community and had to go into debt to get to that point in our career, it would be nice to have a little payback for the work that we are doing.”
Terry said that even if some debt is forgiven, you may not be fully off the hook.
She said various amounts of debt forgiveness have been suggested, ranging from $10,000 to $50,000.
So if only $10,000 is forgiven, the average borrower in Nebraska will still owe $22,000.
“So kind of think about what you could do to set yourself up for success, in hopes that there is going to be forgiveness, and if there is forgiveness, what piece is going to be forgiven,” she said.
It may be hard to take on that payment once again, as your budget may have changed.
Terry suggests calling your loan provider and figuring out a plan before you miss a payment.
“We don’t want you in default or delinquency because then your loans won’t get forgiven. You have to be current,” she said. “So we are going to encourage people, even if they have to go to an income-driven repayment program, and it’s only $50 a month, pay that $50. If loans go to get forgiven, make sure you’re current.”
Payment pauses are making people more aware of how much these payments can impact their life, Terry said.
“Thirty thousand dollars is a lot of money, especially coming right out of college and trying to get your life started and pay for all of these things,” she said.
More new borrowers are looking into ways to save before taking on more debt, like looking for grants and scholarships, Terry said.
“Schools are also taking action, where if you enroll as a freshman, it’s the cost of education doesn’t go up. So that’s brought some very positive things to this particular issue because it is a big issue,” she said.