Last month, President Biden extended the freeze on federal student loan repayments until August 31. This raises many questions: should I start paying now or should I wait?
LITTLE ROCK, Ark. – Meet Emily Towe. She’s a lawyer in Little Rock, and like 43 million other Americans, she has student loans.
“Right now, I think I’m at about $200,000 total for student loans,” Towe said.
That’s a disheartening number for anyone, and the Bowen School of Law grad is choosing not to pay right now during the federal student loan freeze.
“You study for the bar exam and try to catch up on everything else,” Towe said. start paying them back.
Last month, President Biden extended the freeze on federal student loan repayments until August 31. Previously, the deadline was May 1.
The extension also raised the question at a White House press conference about the president using executive power to possibly rescind up to $50,000.
“I do not plan to take 50,000 in debt relief. However, I am seriously considering whether there will be further debt relief. I will have a response on this in the coming weeks” , Biden said.
Federal student loans have been suspended since March 2020 due to the pandemic.
The president’s extension has even caught the attention of some Arkansas politicians. In response to President Biden’s extension of the payment freeze, Arkansas Senator John Boozman released the following statement:
“Once again extending the student loan repayment moratorium is the latest example of President Biden speaking out of both sides of his mouth when it comes to the pandemic. Continuing this pause is a gift to his political base and an insult to American taxpayers and workers who have fulfilled their obligations. The Biden administration should work in a bipartisan way to make student loan repayment a simpler and more responsible process instead of this patchwork solution that could pave the way for permanent, unnecessary loan forgiveness for high-income borrowers.
According to the Federal Reserve, the average person has a federal debt of about $37,000 in student loans.
That’s a big number, but Stephen Yao, an assistant professor of insurance and risk management at UCA, said that’s not all.
“You know, in the United States, when people die. On average, they have student loan debt of $25,000,” Yao said.
The UCA professor understands the benefits of waiting to pay, but said people who can afford those payments now should think about the long-term impacts.
“This is the first lesson I teach my students. If you have debts, I will pay them as soon as possible.
When it comes to the call between paying sooner or later, Yao encourages self-discipline and discretion.
“They’re so used to using someone else’s money for free. This is wrong, you will hurt people in the long run. They won’t have money to save for their long-term project or retirement,” he said.
Professor Yao also suggests repaying under an income-based repayment plan, which sets your monthly payment at an amount that’s intended to be affordable based on your income and family size.
This plan is exactly what Emily will be doing when her payments are due at the end of August.
“Yeah, it’s just another thing that’s going to come out of the bank account. You receive an alert asking you to make sure you have money in the bank on a certain day. You just have to think that way. You borrow it and you are expected to pay it back.
Professor Yao’s best advice for future borrowers is to do your homework before taking out a federal loan.
“There is a lack of financial literacy. High school students never share financial literacy and take on this financial responsibility,” Yao said.