“Teacher With $303K Student Debt Says Biden’s $10K Relief Plan Not Enough” (businessinsider.com)
Finally, I am seeing various publications (Business Insider, etc.) writing about accrued interest on student loans. Interest on the principal and also the interest. This particular article also touches upon Deferred Student Loans and the resulting paying the interest first before touching principal. This is much of what I have pointed out previously and largely ignored. Student loans can be a La Brea tar pit for young people.
“13 Mistakes to Avoid When Repaying Student Loans | Edvisors.” Mistake #7 of 13 student loan mistakes is to the left and addresses what I just said about paying interest first before touching principal. Click on the image to enlarge it. Most do not understand this may occur with most all student loans and we are seeing the results of this.
One of the requests I have been promoting is to forgive the interest and then apply the forgiveness. The $10,000 in forgiveness is a drop in the bucket if it goes against interest initially.
If it weren’t for compounding interest, Cheryl, who requested her last name be withheld for privacy concerns, thinks President Joe Biden’s plans to forgive $10,000 in student debt for federal borrowers might have made a difference for her.
But with $303,000 in federal student debt and an additional $20,000 in private student loans, the president’s plan just isn’t enough.
“It is not even a drop in the bucket,” Cheryl, 53, told Insider. “If you wanted to make a real difference, you could do away with half the interest we’ve accrued, but for now I’ll never be able to cover the payments.”
This is exactly what I have been saying and have talked with Alan at Student Loan Justice. I made this point at Angry Bear. “Why $10,000 of Student Loan Relief will not Help.” I can see Republicans having a field day if Biden even moves in this direction. Few who have paid off their loans pre 2000 have faced these types of loan issues.
“As a teacher in Massachusetts, Cheryl was taking out student loans for her bachelor’s degree in English. Later she received her master’s degree in education accruing more loans such as bad credit payday loans. While she said she has no problem paying back the debt she borrowed, the problem is the accruing interest while she was in school while her loans were in forbearance. At her current modest income level, it is nearly impossible for her to reduce the principal. A principal balance swelling to more than $300,000 due to interest.
‘The national director of the NAACP Youth & College Division, Wisdom Cole told Insider; “$20,000 is not enough and neither is $30,000. We have to cancel a minimum of $50,000 or more. Isn’t the goal to get the most amount of relief to the most borrowers?'”
So, what has Cheryl been doing during the last two years of no student loan payments?
“During the payment pause, Cheryl was still making around $400 monthly payments on her private student loans, and not having to make the $200 federal monthly payments under her income-driven repayment plan provided a slight financial reprieve that helped her afford other basic necessities.”
“I have $200 to get gas, and groceries and everything else, and there’s not much left after that,” Cheryl said. “It keeps you in this nasty little loop that you can’t get out of because I can’t afford to pay it down and the interest keeps coming.”
What about the Public Service Loan Forgiveness (PSLF) program forgiving student loan debt for public servants after ten years of qualifying payments?
“She was denied due to what she said was her time spent in payment forbearance while in school.”
The doors have been closing on solutions for students. Instead of relying on repayments and interest as a credit on the budget, another avenue is applying Modern Monetary Theory (MMT). The United States is a sovereign entity and can print money to pay its debts. Another site for the wrong reasons was also touting this for Social Security.