HIGHLAND HEIGHTS, Ky. (FOX19) - Just hours after his inaugural address, President Joe Biden moved quickly signing 17 executive orders and one is to direct the Department of Education to extend the current pause on federal student loan payments.
The freeze on those payments and interest now extends until October as part of the federal government’s COVID-19 response, but only applies to federal student loans.
Before President Biden signed this student loan executive order, payments were supposed to resume at the end of January.
At Northern Kentucky University, Professor of Economics Dr. Linda Dynan addresses last year’s all-time high, close to $1.6 trillion in federal student loan debt according to the Federal Reserve Bank of New York.
“A lot of that is graduate-level debt that’s not going to be affected by this. Medical school, law school, all of these things have skyrocketed even relative to undergraduate, but those are people we shouldn’t worry quite so much about because they’re actually going to make incomes that support that. The big question is really with people on the other end who take on debt, don’t complete their degrees and have no way to pay back,” Dynan said.
During his campaign, Biden supported canceling $10,000 of federal student loan debt per person and whether that legislation gets pushed through Congress remains to be seen.
Biden also supports an income-driven repayment plan that includes an option for Americans earning more than $25,000 per year.
They could put five percent of their income to loans, and after 20 years, that would be forgiven.
“From that perspective, that makes a lot more sense, where we say we link the amount of forgiveness to the amount of income a family or a student has and then we can really direct the money where it’s needed,” Dynan adds.
Meanwhile, at UC, Executive Director of the Kautz-Uible Economics Institute at the Carl H. Lindner College of Business emphasizes one thing to keep in mind is historically low-interest rates.
Interest rates on federal student loans were lower than ever last year.
“If you do have that student loan debt, it might make sense for you to actually consolidate and refinance your outstanding student loans to take advantage of those low-interest rates. In terms of how that will affect the local economy, there’s about 15% of students who have some form of student loan debt so for those individuals it’s going to make a tremendous impact. The average monthly payment is just over $200 and so suspending these payments will provide some economic relief for those individuals,” Jones said.
Other advice from Jones is to reiterate who qualifies under this executive order from Biden.
It focuses on whether you refinance or consolidate your loans through the federal government or you go through a private lender.
“If you went through a private institution or bank, you’re not going to be eligible for the suspension on student loans and interest until October,” Jones adds.
In 2020, according to Brookings Research, one in four adults, nearly 45 million Americans, owed student loans.
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