KANSAS CITY, Mo — President Joe Biden announced on Wednesday he will extend the student loan moratorium once again until the end of the year.
In addition, he forgave $10,000 for borrowers who make less than $125,000 a year.
Those with undergraduate loans can also cap their payment at 5% of their monthly income.
“The burden of knowing the loans are going to be have to paid back, at any point in time, is always something that looms over my head,” Simone Baldeh, a 23-year-old college student, said.
Baldeh is returning to UMKC for her psychology degree this fall. She took a semester off after attending Missouri Western University for two and a half years.
“I did have a scholarship, but it wasn’t a full scholarship — it wasn’t a full ride,” said Baldeh. “ I was lucky enough to have a grant, but I also had to take out a loan. Not just my first year, but my second year as well.”
Right now, Baldeh has over $20,000 in student loan debt. It does not include the online classes she will take this fall or the cost of grad school.
She works two jobs right now, as a nanny and a dog walker, just for extra cash.
“But that’s not enough to pay for a college education, it’s not enough to pay for tuition, room and board,” said Baldeh. “I don’t know how I’m gonna pay it off, I don’t know how long its gonna take my to pay it off, I don’t know how I’m supposed to pay it all back because that is a lot of money.”
Associate Attorney, James Boyce, says the first thing borrowers should do is figure out who their servicer is, what type of loan they have and how much they owe. From there, they can choose from six different income-based plans.
The White House introduced a new plan on Wednesday.
“The formula is gonna be lower, meaning that your payment is going to be lower. And if your balance was lower, it will last for only 10 years instead of 20. So that means lesser payments over a shorter period of time,” said Boyce.
Whether a borrower qualifies for ten or 20 years depends on if their balance was below $12,000 to start.
Borrowers should also check to see if they qualify for the Public Service Loan Forgiveness, which is for people who work in government or non-profits. Students who attended for-profit schools that lied or took advantage of them may be considered for debt cancellation as well.
Filing for bankruptcy is also an option, but Boyce says it can get tricky with student loans.
“You can apply payments to principal through a chapter 13 bankruptcy. You can file one of those adversary actions, one of those lawsuits and seek a settlement,” said Boyce. “You have to claim an undue hardship, and essentially file a lawsuit within the bankruptcy to have those loans discharged.”
The Biden Administration recently announced what is called the Fresh Start Program as well, which means if you have loans that are sufficiently overdue, you may be able to get out of default.
“The problem is, there are steps you have to take and it’s a limited time,” said Boyce. “If you legitimately can’t afford a thing, you can probably get a zero dollar payment plan.”
Boyce advises borrowers to call their student loan servicer and make sure their contact information is up-to-date. Sevicers will often reach out with new programs that borrowers can benefit from.
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