By Laura Onyeneho
The clock is winding down until federal student loan payments are set to resume, and President Joe Biden has yet to make a concrete decision on widespread student loan debt forgiveness.
If no action is taken by Congress of Biden, be expected to resume payments on September 1st.
The interest-free student loan payment pause is in its third year. At this point many borrowers are thinking if 0% interest on student loans is a preferable option.
Typically, federal borrowers pay between 2% to nearly 7% on their student debt, and if this rate continues, borrowers could save around $1.5 billion per month in interest. That means, any payment made over the past year would have gone toward the principal balance of the loan, allowing borrowers to make progress on reducing their debt to a reasonable amount.
With the payment moratorium set to expire, inflation at an all-time high, and midterm elections around the corner, several members of Congress are considering zero percent interests rates.
“The administration has had such a difficult time with the economy. There is a reason why he might be kicking that can down the road a little bit closer to midterms,” said Brannon Lloyd, Founder of The College Money Guys, a college planning company. “Right now, student loans are at zero because of COVID and I do think that it will continue for a while.”
Lloyd says that zero percent interest rates come at a cost, and it would most likely fall on the backs of taxpayers for the loss of government revenue. Paying tax dollars towards subsidized rates for college students isn’t a problem for Lloyd personally, but he believes forgiveness adds more to the national debt at a time when the country can’t afford to do so.
“This is why College Money Guys works with students and families to avoid student debt entirely,” Lloyd said. “Most employers look at internships and work experience versus where you went to school, so we are very strategic with where our students go to college. The issue of student debt doesn’t end with cancelations, its more complex than that.”
The Defender asked student loan borrowers on social media their thoughts about this proposal. Here is what you all had to say.
I’m okay the 0%. When I took out my loans, I never expected the government to cancel them because that wasn’t the agreement that I made with them when I signed my promissory note. Also, while cancellation is a nice thought, what services would be cut and taxes raised in order to cover the amount being forgiven? Everything has a cost associated with it.TAMEKA D. HAYES
0% interest would help. Then maybe my payment wouldn’t be so high. It’s unfortunate so many folks earn masters degrees to Acquire the jobs they have but don’t make the amount I would need to pay my normal monthly payment. It’s like a double edge sword especially for those marginalized. I highly doubt the government would ever cancel student loan debt.KATWIAN ZETRENNE-NORMAN
Interest is a huge part of the reason that no one can ever get caught up or pay back the loans. We spend twice as much or more by the time it’s paid off with interest. I think this would ease the burden on millions.NICOLE FLOWERS
I was hopeful that at least some student loan that would be forgiven but 0% interest would help Borrowers to pay off to loan debt that has been all but inescapable.KIM JOINER-EDWARDS
The way the interest accrues makes it difficult to pay back. I owe $30,000 in student loans. I paid off a $30,000 personal loan for some property in 2 years; I have been paying on my student loans since 2004 (Master’s degree). Thankfully I qualify for the Public Service Forgiveness Program. But think of this, I have made well over the 120 qualifying payments and my loan decreased by less than $1,000. So over 10 years of paying, my loan has not decreased. I don’t fully understand why…I just kept paying. That has to be the reason for all of the lawsuits, complaints, etc. Something needs to change, and 0% interest or the way it accrues is a good start.TOOSDHI JACKSON
Is the 0% rate supposed to be retroactive to the point that it a fully removes from all existing loan holders the amounts of interest are (1) currently there and (2) apply payments that were only covering interest in the past to the principal? If no, I don’t really find 0% interest helpful yo current loan holder that are already in the hole. 1000% love that future generations of student might not have to deal with I retest though!KHARA MICHELLE
Not even wanting to pay for what you consumed sans interest is the height of entitlement. Tuition pays the professor, tech fees pay for all manner of tech support, housing fees pay for the roof over your head etc…. Who’s supposed to absorb the costs of all the things previously consumed by the students? Private lenders want their money and they are gonna get it. Loan forgiveness will just become a shell game of redistributing the cost of some people’s education to the rest of us.ALECIA LEWIS