Hoping for Student Loan Forgiveness Won’t Pay the Bills – Southwest Virginia Today


Federal student loan borrowers are waiting with bated breath to see whether loan forgiveness — which President-elect Joe Biden says he’ll make a priority — becomes a reality.
Industry experts say borrowers shouldn’t count on it.
“I think we’re closer to loan forgiveness than we’ve ever been before, but that doesn’t mean I think we’re close,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit group. Mayotte says other priorities such as the pandemic and its accompanying recession are likely to delay possible forgiveness.
Biden’s transition team on Jan. 8 reaffirmed his support for $10,000 in student loan forgiveness for each federal student loan borrower as part of additional coronavirus relief, but only through congressional action — quashing speculation about quick forgiveness via an executive order.
Currently, 45.3 million Americans — about 13.7% of the total U.S. population — hold federal student loans. Approximately 15 million borrowers would see their student loan debt wiped clean with $10,000 of broad loan forgiveness per borrower, according to a NerdWallet analysis of federal student loan data.
Is forgiveness still possible?
Crucial details around any potential forgiveness proposal remain unclear. The decision to go through Congress rather than use executive action means every facet is up for debate.
For example, it’s unclear if there will be an income threshold to qualify or if it would be a blanket forgiveness. There’s also no plan for what borrowing qualifies: Would parent or graduate PLUS loans get forgiveness — or commercially held FFEL or Perkins loans, for that matter? It appears that private student loans are off the table.
Even the amount of forgiveness could change: Soon-to-be Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., proposed a more ambitious $50,000 blanket forgiveness last fall. But this seems less likely to pass in a divided Senate.
“It doesn’t seem like there will be massive forgiveness given concern among the more conservative Democrats in the Senate,” says Robert Kelchen, associate professor of higher education at Seton Hall University in South Orange, New Jersey.
“Modest forgiveness could happen,” he says.
Federal payment pause likely to be extended
Right now, federal student loan borrowers don’t have to make payments due to an interest-free pause, called forbearance, that’s been in effect since March 13 and extended twice by President Donald Trump. It is set to expire Jan. 31, but Biden’s transition team says he intends to extend the current federal student loan forbearance on day one.
It’s unclear how long this extension would last. For now, experts say it’s smarter to concentrate on a strategy for the day payments restart rather than to plan for forgiveness.
Repayment is expected to be messy when it starts again since the system wasn’t designed to turn on and off, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade association representing student loan servicers.
Kelchen agrees: “Whenever [payment] restarts there will be a large increase in delinquencies and defaults — some people may be hard to contact, some people may not be able to pay, some people may not want to pay. Starting this all at once is just an administrative nightmare.”
While the pause continues, here’s what you can do to prepare.
If you’re experiencing financial hardship
Those who are out of work or have experienced other financial difficulties due to the coronavirus should use the pause as a time to focus on paying for essentials like rent, groceries or utility bills.
Before repayment restarts, plan to contact your servicer to enroll in one of the following:
- An income-driven repayment plan will set your payment amount to a portion of your income and extend how long you’ll repay the debt. If you don’t have a job, your payments could be as low as zero.
- An unemployment deferment will allow you to defer payments for up to 36 months, but interest will accrue and be added to the loan total when you start making payments.
If you defaulted on your student loans before the pandemic, contact your servicer about loan rehabilitation. Each month you spent in forbearance counts toward the nine needed for rehabilitation.
If your finances are in OK shape
During the pause, if you haven’t experienced job loss or other financial insecurities, prioritize paying down any high-interest debt, such as a credit card. You could also pad your emergency fund with enough money to cover three to six months of expenses.
If you want to repay your loans
Mayotte encourages borrowers whose finances are in good shape to take advantage of this zero interest period by making extra payments.
“That’s an unheard-of opportunity that we’ve never seen before and we may never see again,” Mayotte says.
You can still repay your loans during the pause, but you’ll have to contact your servicer to do it.
Or consider setting aside the money you would otherwise spend on student loans and make a lump-sum payment on your highest-interest loan just before repayment and interest accrual resumes. You’ll preserve financial flexibility and get the same result.
If you prefer to wait and see whether forgiveness happens, make your required payments, but don’t pay extra until any amount of relief is firm.
If you have private student loans
Private student loan borrowers aren’t expected to receive federal relief, experts say. If you’re experiencing financial hardship, contact your lender about options for relief, such as a short-term forbearance (with interest accruing) or a temporarily lowered payment.
If you have private student loans and your finances are solid, you could consider refinancing to take advantage of historically low interest rates. Federal student loan borrowers shouldn’t refinance privately right now to ensure they don’t miss out on any potential future forgiveness.
RELATED: States with the most and least student debt
#51. Utah

– Total score: 15.67
– Student loan indebtedness rank: 51
– Grant and student work opportunities rank: 25
Utah’s students have the lowest debt in the country. Graduates owe only $16,633 on average, according to the results of a 2020 study from LendEDU, a website that compares loans. That is nearly $4,000 less than New Mexico, the next closest state. Only 32% of Utah’s students have debt. One reason: The state has some of the country’s lowest tuition at public universities and colleges.
#48. Wyoming

– Total score: 30.36
– Student loan indebtedness rank: 46
– Grant and student work opportunities rank: 35
Wyoming’s Hathaway Scholarship, created in 2005 with a $400 million permanent endowment, pays for qualified high school graduates to attend the University of Wyoming or any of the state’s seven community colleges. The Wyoming Healthcare Professional Loan Repayment Program repays health professionals’ educational loans if they practice in an underserved area for at least three years.
#47. Washington

– Total score: 30.67
– Student loan indebtedness rank: 47
– Grant and student work opportunities rank: 33
The Student Loan Survival Guide, published by the Washington attorney general’s office, offers links to resources for every step of the process, for every high school student considering college loans, and former college students who struggled with the cost of school.
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#46. District of Columbia

– Total score: 31.21
– Student loan indebtedness rank: 44
– Grant and student work opportunities rank: 30
The District of Columbia’s ombudsman and its Department of Insurance, Securities, and Banking help students to minimize their debt. The district’s attorney general’s office has compiled a web page of student loan repayment resources.
#45. Florida

– Total score: 33.28
– Student loan indebtedness rank: 45
– Grant and student work opportunities rank: 11
Florida’s students were accumulating student debt at a faster rate than any other state, a 2019 study found. The state requires schools to keep students informed about the amount they owe. The state passed a law in 2020 that protects professional licenses even if a graduate falls behind on student loan payments.
#43. Alaska

– Total score: 33.83
– Student loan indebtedness rank: 43
– Grant and student work opportunities rank: 6
Alaska offers a loan repayment program for health care workers who will live and work in areas with a dearth of medial, dental and behavioral health professionals. The state is among those with the lowest proportion of students with debt, according to WalletHub.
#42. Arizona

– Total score: 36.5
– Student loan indebtedness rank: 42
– Grant and student work opportunities rank: 39
The student loan default rate in Arizona, 11.45%, was a percentage point above the national average, according to a 2019 LendEDU study. Although some schools in Arizona lowered their default rates from 2014 through 2016, others were still above the national average.
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#41. Colorado

– Total score: 38.35
– Student loan indebtedness rank: 40
– Grant and student work opportunities rank: 38
Colorado’s funding for colleges and universities is more dependent on tuition than other states, 70% compared to 46.4% nationally, according to a report from The Bell Policy Center. That policy forces many students to borrow.
#40. New Mexico

– Total score: 38.36
– Student loan indebtedness rank: 41
– Grant and student work opportunities rank: 27
For students at risk of defaulting on loans, New Mexico offers student loan forgiveness and consolidation of debt. Doctors and nurses who help address the health care shortage in New Mexico can qualify for no-interest loans and other benefits.
#39. Virginia

– Total score: 39.45
– Student loan indebtedness rank: 34
– Grant and student work opportunities rank: 44
Among Virginia’s graduates, 57% had student loan debt, according to a 2019 report from the nonprofit The Institute for College Access and Success. Those who have a Federal Family Education Loan, Perkins loans, or privately held student loans, and are struggling with their payments because of the coronavirus pandemic, are eligible for waived late fees and other relief.
#38. Oregon

– Total score: 40.57
– Student loan indebtedness rank: 39
– Grant and student work opportunities rank: 21
Student borrowers in Oregon are defaulting on their loans at a rate of 11.5%, higher than the national average of 10.1%, according to a 2019 LendEDU study. Some community colleges had default rates of more than 25%.
#37. North Carolina

– Total score: 41.01
– Student loan indebtedness rank: 38
– Grant and student work opportunities rank: 20
In North Carolina, more than 60% of students who graduate have debt. Though its schools have relatively low tuition, the state reduced funding for public schools by 18.6% from 2008 to 2018.
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#36. Tennessee

– Total score: 41.13
– Student loan indebtedness rank: 37
– Grant and student work opportunities rank: 23
In Tennessee, defaulting on a student loan can mean losing a professional license. Florida Republican Sen. Marco Rubio and Massachusetts Democratic Sen. Elizabeth Warren introduced bipartisan legislation in the Senate to protect such practices. Reps. Donna Shalala, Democrat from Florida, and Mark Walker, Republican of North Carolina, introduced a companion bill in the House.
#35. Maryland

– Total score: 41.39
– Student loan indebtedness rank: 31
– Grant and student work opportunities rank: 47
Maryland is awarding nearly $9 million in tax credits to residents overwhelmed by student loan debt, including 6,331 residents who attended in-state schools, who will each get $1,000 through the Student Loan Debt Relief Tax Credit, and 3,269 who attended out-of-state schools, who will receive $813 each in tax credits. Maryland students owe an average of $32,165.
#34. New York

– Total score: 43.07
– Student loan indebtedness rank: 28
– Grant and student work opportunities rank: 40
College graduates of an approved New York State college or university who agree to operate a farm in the state full time for five years can obtain loan forgiveness under a young farmers program. New York also paused collection of student debt referred for collection to the state attorney general’s office in 2020 as a result of the coronavirus pandemic.
#33. Louisiana

– Total score: 43.15
– Student loan indebtedness rank: 36
– Grant and student work opportunities rank: 5
In 2018, Louisiana reported that more than half of Louisiana’s high school graduates were eligible for state scholarships for college. State funding for higher education dropped 40% between 2008 and 2018.
#32. Oklahoma

– Total score: 43.24
– Student loan indebtedness rank: 35
– Grant and student work opportunities rank: 10
Oklahoma offers loan forgiveness to physicians, dentists and other health professionals who agree to serve in specific communities in the state. It is among the states with the highest percentage of student loans that are past due or in default, according to WalletHub.
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#31. Arkansas

– Total score: 43.54
– Student loan indebtedness rank: 33
– Grant and student work opportunities rank: 17
Six years after Arkansas began a default management program, students’ default rates fell every year, data released in 2019 shows. Arkansas’ default rate dropped from 19% in 2013 to 10.4% in 2019. The national rate was 10.1%. Arkansas is among the states with the smallest percentage of student loan borrowers who are 50 or older, according to WalletHub.
#30. Maine

– Total score: 43.69
– Student loan indebtedness rank: 22
– Grant and student work opportunities rank: 51
Maine college graduates owed, on average, more than $32,600 in student loans, the eighth-highest amount in the United States. It offers student debt relief to graduates who live and work in the state under the Educational Opportunity Tax Credit.
#28. North Dakota

– Total score: 44.48
– Student loan indebtedness rank: 25
– Grant and student work opportunities rank: 41
Veterinarians can qualify for loan forgiveness in North Dakota if they will serve in high need areas. Three are chosen each year, with the goal of attracting new veterinarians for animals raised for meat.
#27. Nebraska

– Total score: 44.74
– Student loan indebtedness rank: 29
– Grant and student work opportunities rank: 26
The average student debt for graduates since 2016 is $25,501. Primary care doctors, dentists and other medical professionals are eligible for loan repayment awards if they practice in areas where there are shortages.
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#26. Missouri

– Total score: 44.9
– Student loan indebtedness rank: 24
– Grant and student work opportunities rank: 42
In Missouri, 58% of graduates had student loan debt in 2017, and they owed an average of $28,650. The state offers student loan forgiveness to some employees of government agencies or nonprofit organizations.
#25. Montana

– Total score: 45.7
– Student loan indebtedness rank: 27
– Grant and student work opportunities rank: 24
In Montana, 57% of students had loans when they left school, owing an average of $28,032. Over the past 10 years, the number of those with debt has dropped 10.65%.
#24. Texas

– Total score: 45.78
– Student loan indebtedness rank: 30
– Grant and student work opportunities rank: 15
A 2019 study by Southern Methodist University found that Black and Hispanic students in Texas borrow on average more than white students: $7,124 more for Black students and $453 for Hispanic students. Asian students meanwhile borrow $3,155 less.
#23. Illinois

– Total score: 47.05
– Student loan indebtedness rank: 21
– Grant and student work opportunities rank: 34
College loans in Illinois can be refinanced at low interest rates by the Illinois Treasurer’s Office under the Illinois Student Loan Investment Act passed in 2019. More than 2 million residents of Illinois, 17% of the population, have student loan debt of, on average, $29,855.
#22. Massachusetts

– Total score: 47.71
– Student loan indebtedness rank: 17
– Grant and student work opportunities rank: 49
Massachusetts is a state that revokes professional licenses for unpaid student debt. A bill introduced in its legislature in 2019 would prohibit the practice. The state also is considering a Student Loan Bill of Rights.
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#21. Georgia

– Total score: 48.68
– Student loan indebtedness rank: 23
– Grant and student work opportunities rank: 13
Among the class of 2018, 69% had student loans. The average debt among the graduates was $29,800. In 2019, billionaire tech investor Robert Smith agreed to pay the student loans of the graduating class of Morehouse College, the historically Black college in Atlanta. He later paid off the debt of the students’ parents too, with a total donation of $34 million to the Morehouse College Student Success Program.
#20. Alabama

– Total score: 48.71
– Student loan indebtedness rank: 26
– Grant and student work opportunities rank: 4
Alabama ranks in the top states for rising student debt over five years, according to an Experian analysis in 2019. Average debt is $35,674, up 30.9%. Another study from LendEDU found student loan debt among graduates at the University of Alabama at Birmingham fell in 2018: $31,129 on average, down 12.02% from 2017. Private school debt also was less, $21,326 on average, a 3.33% drop from 2017.
#19. South Carolina

– Total score: 49.72
– Student loan indebtedness rank: 20
– Grant and student work opportunities rank: 12
Student debt increased faster in South Carolina than in any other state over the past decade, according to a 2019 report for Experian. A WalletHub study in 2019 found that state ranked fourth for debt as a percentage of income.
#18. Wisconsin

– Total score: 50.36
– Student loan indebtedness rank: 19
– Grant and student work opportunities rank: 18
Wisconsin’s governor has created a task force to look for ways to reduce student debt in the state. The loans disproportionately affect low-income and first-generation college students, students of color, women, and veterans, according to the governor. Wisconsin’s average debt for the class of 2019 was $30,600.
#17. Vermont

– Total score: 50.66
– Student loan indebtedness rank: 13
– Grant and student work opportunities rank: 48
Vermont has the highest number of student loan borrowers who are 50 or older, according to a 2019 WalletHub study. Student loan debt in the state is $31,432 on average, compared to $28,565 for the country.
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#16. Kentucky

– Total score: 51.2
– Student loan indebtedness rank: 18
– Grant and student work opportunities rank: 9
In 2020, Kentucky is second in the country, with a delinquency rate on student loans of 15.75%, according to Student Loan Hero, a subsidiary of LendingTree. Kentucky has a loan repayment program for health care professionals who work in rural and underserved areas.
#15. Connecticut

– Total score: 51.8
– Student loan indebtedness rank: 11
– Grant and student work opportunities rank: 43
Graduates in the state faced the highest student loan debt in the country last year, according to LendEDU. Connecticut’s debt averaged $38,776. In April 2020, the governor announced that in collaboration with other states, Connecticut had reached an agreement for relief for some privately held student loans.
#14. New Jersey

– Total score: 52.44
– Student loan indebtedness rank: 15
– Grant and student work opportunities rank: 28
New Jersey announced in April 2020 that some residents with privately held loans will be eligible for relief: payments postponed for at least 90 days, negative credit reporting suspended, late fees waived, and other help.
#12. Kansas

– Total score: 52.94
– Student loan indebtedness rank: 16
– Grant and student work opportunities rank: 19
Kansas graduates had on average $26,764 in student debt in 2018, an amount less than the national average of $29,200. The state offers loan repayments to students who will live in rural areas, are health care professionals, and are primary care and psychiatry residents.
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#11. Delaware

– Total score: 53.79
– Student loan indebtedness rank: 10
– Grant and student work opportunities rank: 32
Average debt for Delaware graduates grew by 77% between 2008 and 2016, according to the Institute for College Access and Success. The average debt was the fifth highest in the country, but at the same time, Delaware’s number of out-of-state students also was above average.
#10. Rhode Island

– Total score: 54.89
– Student loan indebtedness rank: 7
– Grant and student work opportunities rank: 50
The Rhode Island Student Loan Authority offers low-cost student loans, refinancing choices, and free tools to find internships and scholarships. In 2019, it enacted a Student Loan Bill of Rights to make sure borrowers are treated fairly. In all, more than 130,000 Rhode Island residents owe $4.5 billion in student loan debt.
#9. Michigan

– Total score: 55.19
– Student loan indebtedness rank: 12
– Grant and student work opportunities rank: 8
Michigan places fifth in student loan debt as a percentage of income, according to a 2019 WalletHub study. The state offers scholarships or loan forgiveness programs for teachers, nurses, doctors, dentists, and other health care professionals.
#7. Mississippi

– Total score: 59.56
– Student loan indebtedness rank: 9
– Grant and student work opportunities rank: 2
Mississippi offers forgivable loans for nurses and teachers in undergraduate programs and for counselors, school administrators, dyslexia therapists, and speech pathologists in graduate programs.
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#6. Minnesota

– Total score: 60.46
– Student loan indebtedness rank: 3
– Grant and student work opportunities rank: 45
Minnesota offers a range of loan forgiveness programs for health care technicians, dentists, rural mental health professionals, nurses, pharmacists, physicians, and veterinarians. Minnesota’s graduates had a median debt of $25,500 in 2017.
#2. Pennsylvania

– Total score: 64.59
– Student loan indebtedness rank: 4
– Grant and student work opportunities rank: 7
Pennsylvania’s lawmakers are considering a Student Borrowers’ Bill of Rights.
The state has some of the highest debt in the country. It was ranked #3 in a study by LendEDU, with borrowers averaging $38,521 of debt in 2019.
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#1. South Dakota

– Total score: 66.17
– Student loan indebtedness rank: 1
– Grant and student work opportunities rank: 46
South Dakota offers some teachers student loan forgiveness while the Dakota Corps Scholarship aims to help students in the state. South Dakota graduates, 74% of whom have student loan debt, owe on average more than $30,000.
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The article Hoping for Student Loan Forgiveness Won’t Pay the Bills originally appeared on NerdWallet.