Students will pay their federal student loans with no debt relief. However, low-income communities will likely be affected as they own more than 50% of federal student loans.
Payment of federal student loans is to resume in October. (Photo: Jeanne D’Arc Credit Union)
Students To Resume Payments of Federal Student Loans
In October, a staggering 43 million Americans are set to resume the payments of their federal student loans, as hopes for debt relief have been dashed. President Biden’s proposal to forgive up to $20,000 per individual has been invalidated by the Supreme Court.
According to News 3, the plan, which could have provided complete federal student loans eradication for almost 20 million students, will not come to fruition. Consequently, individuals burdened with federal student loans will have to continue their repayment obligations, adding to the financial challenges faced by many.
The report also revealed that students from low and middle-income communities will likely suffer, as they own more than 50% of the federal student loans.
“The burden will fall disproportionately on people in the lower- and middle-income quartiles… they own more than 50% of the student loans. With around $43,000 average debt. The $43,000 for these people, that’s almost 100% of what they make per year,” said Dr. Fady Mansour of Economics at Columbus State University, as quoted in the report.
According to Dr. Mansour, borrowers typically receive a monthly statement for their federal student loans, with an average amount of $200. This portion of their disposable income, which could have been used for activities such as dining out, shopping, or traveling, will now go toward repaying their federal student loans.
Photo: Marxist.com
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Payment of Federal Student Loans Update
Starting from Sep. 1, 2023, interest on federal student loans will resume, and borrowers will need to begin making payments in October. In an effort to assist those burdened by these federal student loans, the White House has introduced a 12-month on-ramp program.
According to WTHR, this program aims to provide support and a smoother transition for borrowers as they navigate the resumption of payments, offering them additional time and resources to manage their financial obligations.
Aside from that, as part of their efforts to address the student loan crisis, the White House has recently approved a finalized income-driven repayment plan. This plan aims to provide relief to borrowers by reducing their monthly payment obligations.
Under the new plan, the amount borrowers are required to pay each month will be slashed in half, dropping from 10% to 5% of their discretionary income.
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