WTTW: With Forbearance Period Over and Forgiveness Gone, What’s Next for Student Loan Debt

The picture for student loan debt has been pretty tumultuous over the last couple of years. First came the pandemic-spurred repayment pause and subsequent extensions. Next, the Biden administration’s forgiveness program — and then the Supreme Court decision negating it. Borrowers will soon begin repaying their federal student loans after the forbearance period ends this month.
Now, the Biden administration is back with a new student loan repayment plan. It’s called the Saving on a Valuable Education, or SAVE, Plan, and it aims to shrink payments based on income and family size, as well as accelerate forgiveness.
Maureen Amos, executive director of financial aid at Northeastern Illinois University, said institutions are trying to keep students informed about the changes on the horizon.
“We’ve got about 30 million people all at once going into repayment,” Amos said. “Institutions as a whole have been taking it in sound bites with students, encouraging them to reach out … 40% of these borrowers will have a new servicer. So finding out who the servicer is, how to make sure your contact information is updated. And then institutions have been offering either webinars, targeted mailers, 15- to 20-minute workshops on different topics — how do I contact my service (provider) or how do I update my information? How do I budget now using resources that I’ve since reallocated to another area?”
Bottom Line Chicago executive director Will Hobart said all the change around student loan repayment has made the students his organization works with think harder than ever about taking on debt to finance their educations.
“A hallmark of our work with students who are first in their families to attend college is really helping their families and them understand the cost of college and understand what debt looks like in all its forms,” Hobart said. “Making sure that students and their families are making informed decisions about where to go to college that isn’t just the best academic fit and social fit for them, but also colleges that really value pricing their education in a way that is affordable for students of color who are from low-income backgrounds.”
Amos said the SAVE Plan has elements she thinks will be helpful for addressing the student debt crisis.
“Some people may not end up paying anything, and others based on household income, the max up to repayment is 25 years,” Amos said. “So after the 25-year mark, if you’re still making payments, that’s forgiven. It’s definitely a benefit. You know, people are afraid, then you’ve got students who are angry. We’ve got social media groups telling students not to pay back their loans. You’ve also got the value issue with students saying, well, is education even worth it? I don’t want to borrow; how can schools help me avert having to be in debt when I graduate? So it puts a little bit of the onus on us as institutions as well to try to teach and coach students how to get the most free grants and scholarships as possible.”
Hobart agreed that the SAVE Plan would work toward college affordability.
“We believe this is a really important step in helping students navigate repayment in a sustainable way,” Hobart said. “We’re really encouraged by components like this because it ensures that students, when they start their first destination job after college, … some of the students are choosing career paths where they maybe aren’t making six figures out the gate. Being able to repay their loans on a schedule and an amount that makes sense and aligns with the income that they have and then kind of terminates at the end of a certain period of time is also very encouraging for us.”
Amos said as the repayment period approaches, institutions are preparing for impact.
“Aug. 30, we received 16 borrower defense claims,” Amos said. “Institutions across the country are receiving these because of the panic because of these social media groups that are telling people don’t pay back your loans. Whether you don’t like your program, you’re not working in the field you thought you were going to be working in, students are filing these claims, … so schools are having to deal with educating students on a whole lot of levels, working with senior-level administration explaining what some of this means.”
Moving forward, Hobart said he would like to see the Biden administration do more to keep students from having to go into major debt to fund their educations in the first place.
“I think really focusing on the Pell grants, making sure that we’re able to keep that funded, increase the amounts that Pell grants that are available to students,” Hobart said. “Anything the Biden administration can do to minimize the amount of debt students have to take on the front end certainly makes it easier as the students have to think about how to pay back the loans they do take out.”
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