Student management

Student Loan Changes: What You Need to Know About Canceling Debt and Resuming Payments

PHILADELPHIA (WPVI) — Currently, $1.7 trillion in student loan debt is outstanding nationwide.

Our 6abc data team has analyzed the numbers and here’s what they reveal about student loan debt in the tri-state area: 3,150,000 people owe $112 billion in student loan debt.

Pamela Walters of Bear, Delaware spoke to Action News about her loans.

“A couple I paid for and this one just lingers on. Over the years it just got bigger and bigger and bigger. I guess it’s out of interest and because I had took some abstentions,” she said.

Financial analyst and advisor Chuck Minnich of Foundation Capital Management, LLC says the amount of interest accrued by borrowers is staggering and the federal government recently announced that interest rates have increased by 1.5% for new student loans.

“That might not seem like a lot at first glance, and in nominal terms it isn’t, but it’s all relative. That’s a 33% increase in your student loan interest rate,” said Minnich.

Minnich says this comes at a time when “before the pandemic, ten million borrowers were already behind on their payments and there were three million borrowers who had balances over $100,000, which is basically to have a mortgage without having the house”.

Payments have been on a pandemic pause for two years, but unless the government puts in place a seventh extension, borrowers will have to start paying again in less than two months on September 1.

“People need to be aware of their options because there are repayment plans,” Minnich said.

He tells Action News that there are income-based repayment plans, standard 10-year repayment plans, tiered plans where payment amounts start small and grow bigger, and extended payment plans up to 25. year.

“You’ll pay a lot more interest, but if it keeps you going, that’s an option,” Minnich warns.

Meanwhile, President Biden has pledged to forgive $10,000 in student debt per person.

“If this happens, it’s basically a $320 billion stimulus package at a time when inflation is at its highest level in 40 years. So if they’re able to pass the l “cancelling the student loan, they’re more than likely to allow student payments to start over because that will help balance out some of that stimulus. If they’re not able to push it through, they’re more than likely going to let it go.” extend through the end of the year. But all borrowers should be prepared for the possibility that payments will resume in September,” Minnich said.

There are already cases where student loans are forgiven. The government is considering modifying these existing programs so that more people and more payments are eligible. These proposals are currently open for public comment.

For more information on all the sweeping changes the Biden administration is proposing to the “broken” student loan program, CLICK HERE and CLICK HERE.

Copyright © 2022 WPVI-TV. All rights reserved.