Posted on 10/07/2020 8:17:43 AM PDT by Third Person
In March, as it rapidly became clear that the coronavirus pandemic would upend our lives, the U.S. Department of Education offered student loan borrowers a break from their monthly payments.
They accepted.
Less than 11% of people with federal student loans are repaying them during the pandemic, according to data analyzed by higher education expert Mark Kantrowitz. That means about 4.6 million out of 42 million borrowers are continuing to pay down their debt.
The government’s so-called coronavirus forbearance on federal student loans has freed up money for basic essentials for many borrowers, many of whom have seen their income dry up due to the public health crisis. It’s also given people a window into what life would be like without education debt.
Student loans have long outpaced credit card and auto debt as a burden to Americans, and each year 70% of college graduates start off their lives in the red. The average balance is around $30,000, up from $10,000 in the early 1990s, but many borrowers owe $100,000 – or more. The typical monthly payment is $400.
U.S. Department of Education Press Secretary Angela Morabito said that while “the vast majority of our loan portfolio is currently in forbearance,” borrowers made nearly $6.2 billion in federal student loan payments in May, June and July 2020. Still, that’s a drop in the bucket compared to the outstanding $1.6 trillion student loan balance in the U.S.
Before the pandemic, New Yorker Cecilia Sena had to work three jobs just to cover her rent, groceries and monthly $250 student loan bill. She owes around $25,000 in education debt.
Her full-time position as a research assistant at Columbia University, from which she graduated in 2019, pays just around $38,000 a year, so she babysat on weeknights and taught Hebrew school on the weekends.
“I was out all the time,” Sena, 22, said. “It was exhausting. There just wasn’t time for myself.”
As student debt has ballooned, wages have sputtered. Starting salaries for new college graduates have grown less than 1% over the past two years, remaining at around $50,000.
Now that Sena can take a break from her monthly student loan bill, she doesn’t have to work as much and is able to spend more time at home.
When she was juggling multiple jobs, she rarely cooked and relied on microwavable meals and take-out. Now she cooks every day. Some of her favorite meals? Steamed sweet potatoes with tahini butter, chickpea salad and challah, honey and apples.
“It’s so soothing,” she said, of cooking. “It’s one way I feel present in my body and life.” With the extra time, she also does yoga and takes long strolls and bike rides around the city.
But the debt still hangs over her.
“When student loan payments become mandatory again, that’s a scary thought,” she said.
Sena worries about having to take on more jobs that could put her health in jeopardy. New York City appears at risk of a second wave of the virus. “I’m relieved that I don’t have to seek additional work at this moment that would put me and my roommates in a more difficult situation,” Sena said.
In March, the U.S. Department of Education said student loan borrowers could pause their payments without interest accruing until September 2020, but then President Donald Trump signed an executive order that extended the reprieve through the end of the year. Still, that means borrowers may have to resume their payments in less than three months, while unemployment rates remain high and cases of the virus continue to surge across the U.S.
In the meantime, Olivia Elder is enjoying a life that no longer revolves around paying down her student loans. She left The George Washington University in 2018 with more than $30,000 in debt, and had been throwing all of her extra cash, including her tax refunds and bonuses at work, to the balance.
“There was never a ton of money in my checking account,” Elder, 24, said. “It wasn’t comfortable.”
The pandemic — and the break for student loan borrowers — has changed her priorities.
“My life has just expanded to much more than that,” she said.
Recently, Elder, who works in criminal justice reform at a political organization, became the owner of a two-bedroom condominium in Washington, D.C., thanks to a first-time homebuyer program in the city.
“It feels great,” she said. “My grandparents always stressed the importance of owning something.”
Student debt is a hindrance to homeownership. Researchers at the Urban Institute found that if a person’s education debt went from $50,000 to $100,000, their chance of homeownership declines by 15 percentage points.
Even when her student loan bill resumes, Elder said, she’ll probably just make the minimum payments. She cares much more now about building up her own savings.
“I don’t feel my job is in danger, but neither did a lot of people before the pandemic,” she said. “At least I could pay my mortgage for awhile if something were to happen.”
During the break from her $500 monthly student loan bill, Morgan Hopkins, the director of political strategies at a national nonprofit, has paid off more than $12,000 in credit card debt and has started saving for a down payment on a house in Philadelphia.
She’d like to buy a home within two years with a backyard, and she and her partner are thinking about children, too.
“It’s been completely life-changing,” Hopkins, 32, said. “I used to feel like I was suffocating under student loan debt.” She still owes around $68,000.
These months without student loan bills have served as a social experiment, she said: “We’re seeing what’s possible for our generation.”
Both my kids were told they did not have to pay their loans now. They are not accruing interest. They are either saving it, or paying down other debt.
If you gave me “free” money, I would pay it down last as well.
Heck, the forbearance was automatic for my wife and I, so why not use it? It is letting us give more to help out tight political races and to invest.
How many people refused their $1,200 stimulus check?
I guess the idiot liberals at CNBC didn’t hear that there is no interest being assessed on government student loans right now. All loans are in forbearance until 1 January 2021 or beyond.
That is great but we both know that’s not even CLOSE to the norm of what people are doing with the money saved :)
We won’t read that posts that say “my kid squandered the money on garbage :)
Which is what I would probably have done :)
While we’re at it, how many are paying the rent? I know too many landlords who are getting shafted these days. Some with one tenant, some with more than fifty.
Oh, I am right there with you.
One daughter is much, much better with money than I ever was.
The other daughter is still in grad school. Her husband is an artist who actually makes a good living—but he is used to the “ebbs and flows” and he takes pride in sending me notes telling me they are “good until....” because we’ve discussed his planning process.
(And someone who is an ‘artist’ who actually makes a good living is impressive these days. As a former full time photographer, I am amazed.)
Both kids are really debt averse (other than the standard school loan and mortgage stuff.)
When I checked on the PLUS loans for my son and found it to be in forebearance, I set it back up to make payments. 100% of same payment is going to principal. If interest is held off after 2020, we will keep it up.
Said son graduated from a nursing program in May. He is working weekends and pulling any on call shifts he can get.
He is chunking down now that interest isn’t being charged.
call that MOTIVATED.
It is hard to get good data, but roughly a third don’t pay while another fifth pay less than the full rent or get a payment plan.
>>Recently, Elder, who works in criminal justice reform at a political organization, became the owner of a two-bedroom condominium in Washington, D.C., thanks to a first-time homebuyer program in the city.
So, she complains about her level of debt, but then goes into even more debt by buying a pricey condo in D.C.
And if her career is “criminal justice reform”, I imagine she squandered her student loans on a worthless “grievance studies” degree.
I told my wife this is the ideal time to continue paying her student loans since the interest was not accruing.
It is letting us give more to help out tight political races and to invest.
************
Smart moves!
Also, I personally know some people who think Biden is going to wipe out all student debt, and are gambling on that by choosing not to pay their debts right now.
Our mid-20s kid has friends like this. Some have gone so far as to indicate if Biden wins and the school debt is wiped, they plan to get a new car, among other things. Right back into debt.
Kid working where my wife works is having his wages garnished for non student loan repayment.
That sucks. He should call and argue the point.
OR, he might have refi’d his loans to another provider.
Student Loans are more complicated these days. At least more complicated than the ones I got through my bank back in the day. I know that I had troubles paying back the $82 a month in 1983–and they were ready to skin me alive.
I laugh at it now—but $18k a year was doing “Ok” among my peers back then.
We have a fed-loan for my daughter. I have been making double payments since March because the the loan is currently interest free. In the long run this will give us an easier shorter repayment. Great opportunity!
There is probably no point to argue. If he got to the point where he is having his wages garnished, he really screwed up. He didn’t jsut go into default, he jsut pretended that the loan would go away. In 2008, my Ex and I got into a bad financial situation and had to default on our loan. We got everything squared away, but it’s a different loan type. As in, our payments were not paused by the CARES Act. So It doesn’t srprise me that they have not stopped garnishing wages on him. Decisions have consequences. I have another, smaller student loan that was eligable for suspeded payments, but I just kept paying anyway. It woesn’t matter anyway, I’m always 6-8 moths ahead on payments since I overpay.
Most people, if their bank said you don’t have to make payments this year, wouldn’t make payments.
This is NOT surprising.
Why would I turn down getting some of the taxes I paid back?
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