Hunter Watts was the first person in his family to graduate from a four-year university, but realizing that goal meant taking out federal student loans.
Watts graduated from Mississippi State University with a degree in engineering, and he now works at his alma mater as a research engineer. Despite his field being one of the highest paying, he is worlds behind some classmates because of the burden of paying off student loans.
“While I did graduate with an engineering degree, I do not think that everyone realizes that does not mean that I have a golden ticket for life,” Watts said. “Because I grew up poor, I was forced to borrow more to still end up with less than my other classmates. Even though I now have an engineering job, I still have to drive my 20-year-old car that barely makes it to work every day because it’s what I can afford with student loan debt.”
On Wednesday, President Joe Biden announced a federal student loan debt relief plan. Individuals who make less than $125,000 annually or married couples making up to $250,000, are eligible for student loan forgiveness up to $10,000 for non-Pell Grant recipients or up to $20,000 if they were awarded the Pell Grant.
The federal student loans that can be forgiven under the relief plan include the Federal Perkins and Federal Stafford Subsidized and Unsubsidized loans. It also includes Federal Direct student loans and Federal Family Education loans.
The Pell Grant is awarded “only to undergraduate students who display exceptional financial need and have not earned a bachelor’s, graduate, or professional degree,” StudentAid.gov explains. It also does not have to be paid back as it is not a loan.
The White House said Pell Grant recipients make up more than 60 percent of federal student loan recipients – meaning they needed a loan in addition to grant funds to pay for their education.
Watts is one of the many people who received the Pell Grant in order to attend college, and he said now $20,000 of his $59,000 debt will be forgiven.
“(That) means that I can catch up to my classmates that had their school paid for,” Watts said. “It means I can finally look forward to living life and helping other people who are in similar situations.”
Biden’s student loan debt relief plan also extends the pause on federal student loan repayments for the final time through Dec. 31. Payments are expected to resume Jan. 1, 2023. The White House fact sheet says this extension is “to ensure a smooth transition to repayment and prevent unnecessary defaults.”
This relief plan also will impact current college students who have taken out federal student loans. Mississippi University for Women student Alyssia Brewer said she is looking forward to having less of a financial burden when she graduates in 2025 to become a traveling nurse, but she is excited more for her friends who had to borrow more than she did to get a higher education.
“Thankfully, I haven’t had to take out much,” Brewer said. “I transferred to the W from the University of Southern Mississippi, and I have friends that go to State. They’ve had to take out more loans than I have, so I know that this is going to help them. I’m excited for them because they’ll be able to thrive easier and not have to worry about so much debt because they want a good life.”
The Federal Student Aid office within the U.S. Department of Education (ED) said federal student loan borrowers will have an opportunity to receive loan forgiveness in different ways.
Some may be eligible to receive relief automatically because relevant income data is already available to ED. If a borrower’s income data is not available to ED, an application will be launching before loan repayments begin on Dec. 31.
Financial aid offices at various universities are keeping up with the latest information regarding the loan forgiveness and when the application will go live.
The University of Mississippi’s Director of Financial Aid Laura Diven-Brown said her department helps students, alumni, faculty and others in answering questions and directing them through financial situations in relation to affording college and debt repayments.
Diven-Brown provided information from the Common Data Set report, which shows 43 percent of UM undergraduates have borrowed federal loans, and the average cumulative borrowing was $21,586.
“The fact current students are included is really going to be important,” Diven-Brown said. “We’ve been working with our students through the last couple of years that have been hard for a lot of people. … If this is something that can help our students, we will try and get that word out. We have a little less than half of our students that borrow (federal loans). People are anxious to jump on that (application process) now.”
The opposition
However, the decision remains controversial, and some people are concerned about what this means for the economy.
The White House announced that nearly 90 percent of the relief will come to those making less than $75,000 annually, but those who do not have loans or have paid them off are concerned about inflation.
Michael Frayser, an MSU alum who did not have to take out student loans, said capping interest rates would have been a better solution than excusing any portion of federal student loan debt.
“If the government has the power to forgive the entire loan, then certainly they have the power to just forgive the interest,” Frayser said. “Let the borrowers pay back just the principal with zero interest. Seems reasonable to me, and I think it would seem reasonable to most citizens on both sides of the political fence.”
Economics analysts Joseph Briggs and Alec Phillips with Goldman Sachs Group, a multinational investment bank and financial services company, said in a recent report they expect the impact on inflation to be minimal.
Briggs and Phillips said the program will relieve around $400 billion, while The White House said the cumulative federal student loan debt is around $1.6 trillion.
“The aggregate effects from such an income boost would be small, however, with the level of (gross domestic product, a monetary measure of the market value) increasing by about 0.1 percent in 2023 with smaller effects in subsequent years,” the report from Briggs and Phillips reads. “We would expect the effects on inflation to be similarly small.”
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