COLUMBUS, Ohio (WCMH) –– The moratorium on federal student loans is set to expire in coming weeks.
The Biden administration’s pause on federal student loan payments will expire on August 31, causing concern as the U.S. economy slows and interest rates and inflation rise.
“Student debt isn’t happening in a bubble,” Cody Hounania, executive director of the Student Debt Crisis Center, said. “We’re also facing unprecedented record level inflation. So right now is the absolute worst time to turn back student loan payments, where, you know, people will see now another $300, $400, $500 in bills added to their plate when everything else is skyrocketing.”
The SDCC has been surveying Americans all over the country during the pandemic. Hounania is calling the impending deadline a “financial cliff” for people with student loans.
“Well over three quarters of student loan borrowers are not prepared to restart student loan payments,” he said.
The SDCC is advocating for policy action, not only to extend the pause on student loans, but they are also calling for change in the way the Federal Student Aid System is built.
“Borrowers should be able to enroll in one of these affordable income driven repayment plans to lower their monthly payments, and the way the law works is after 20 or 25 years if there’s any debt remaining, it’s forgiven,” Hounania said. “Except only 32 people had received forgiveness through this mechanism because student loan servicing companies had pushed people out of the programs, they wanted to enroll in.”
He said it’s essentially forcing borrowers who are trying to climb their way out right back into an even bigger hole.
“Student loan servicing companies over and over again have really just steered people into the wrong options,” Hounania said. “Towards things that are worse off for them and have left borrowers scratching their head thinking, ‘I thought I was doing the right thing and yet here I am and I’m paying the consequences.’”
Student debt isn’t only on the minds of graduated students. Young adults like current Ohio State University student Kaitlyn Murfitt are already thinking about the loans she’ll be facing out of college.
“It’s definitely been hard with COVID and everything happening. My brother has autism, so he has a lot of stuff that he has to pay for as well,” Murfitt said. “So, school and loans are definitely at the back, but it’s definitely something I’m worried about every day and how I’m going to pay them off.”
Another cause for concern is the lack of education Americans receive about their student loan options and the difference between private and federal student loans.
“A great researcher that I work with said, and I think it’s so poignant … ‘millions of Americans didn’t get this wrong, there is something inherently broken about our student loan system,’” said Hounania.
The SDCC is encouraging President Biden to extend the pause on student loans.
Biden hasn’t specifically said whether he will extend the pause or not, but there is speculation the pause could be extended through 2023.