Alexandra Steinheimer has dreamed of a life without student debt since graduating from college more than a decade ago.
She has about $20,000 in student loans, half of which is federal loans. At times the debt felt like an “unavoidable burden”, says the 35-year-old, which led her to postpone plans in her 20s to travel abroad, move to an apartment with no roommates and save for retirement.
When President Joe Biden announced a sweeping student loan forgiveness plan to forgive up to $10,000 for millions of people with federal student loans and up to $20,000 for Pell Grant recipients, Steinheimer thought the news was too good to be true.
“I almost dropped my phone when I saw the alert,” Steinheimer, who is a Pell Grant recipient, told CNBC Make It. “It felt like a huge weight had been lifted off my shoulders, and I could finally breathe a little easier.”
In the United States, student loan debt – which has reached a crisis of $ 1.7 trillion – has weighed heavily on the shoulders of young borrowers: 67% of borrowers are under the age of 40, according to the Federal Reserve Bank of New York.
The Biden administration’s plan will erase remaining student loan debt for about 20 million people, according to the White House, and provide debt relief for about 43 million total borrowers.
In the week since Biden’s announcement, borrowers ranging from freshly graduated college grads to doctors to parents starting to save for their children’s education sounded off on canceling student loans, with some borrowers call cancellation “lifestyle change” and others claiming that $10,000 is not enough.
“A little more leeway goes a long way”
In June, Steinheimer and her husband, who have no student debt, bought and moved into their first home, a two-bedroom, 1.5-bathroom condo in Washington D.C.
But the financial stress overshadowed the excitement of homeownership for Steinheimer, who is an IT manager at a nonprofit organization: “I have some anxiety about making our mortgage payments and other costs associated with acquiring a new home,” she explains.
Alexandra Steinheimer on a recent trip to Paris
Photo: Alexandra Steinheimer
Biden’s loan forgiveness plan, however, will halve her student debt and significantly reduce her monthly payments, which Steinheimer says is a “game changer” for her as she embarks on this next chapter of her life. life. She plans to use some of the money she has saved to pay off her mortgage and furnish the apartment.
“Having a little more leeway at the end of the month is very helpful,” she says. “This will allow us to stay above our other financial obligations.”
“My debt is still astronomical”
Mikey Collard racked up about $100,000 in federal student debt while pursuing his master’s degree in public relations through a two-year program at the University of Southern California. He had also taken out loans for his bachelor’s degree – about $6,400 – which he repaid soon after graduating.
Collard, 39, does not regret going into debt for his master’s degree. He believes the program, which he completed in 2012, helped him earn a higher salary and build a lasting career. Today, he is senior vice president of the communications company he works for in Salt Lake City.
But due to rising interest rates, Collard says his student debt is “still astronomical”: he’s paid about $85,000 for the loans and still has $69,311 to pay.
The $10,000 rebate he expects to receive will help, but he says he will still be making heavy loan repayments every month “for the foreseeable future.”
“I wish more was done to lower interest rates on student loans because the rates are crazy and that’s what cripples so many borrowers, including myself,” he says.
Collard has three children aged 8, 6 and 2 and is already worried about how he will help them pay for their education.
“I have no hope that the student debt crisis will be resolved in 10 years, when my eldest would probably apply to college,” he says. “Between paying off my own loans and finding a way to financially support my kids through college, I’ll probably be paying student loans one way or another for the rest of my life… it’s endless.”
“I hope this is just the beginning”
Until recently, 37-year-old Juan Antonio Sorto was convinced that going to college would bolster his family’s fortunes.
“When I graduated from college 15 years ago, I didn’t think a bachelor’s degree would give me enough earning potential to take care of my mother, grandmother and sister,” he says.
A first-generation graduate, Sorto completed his undergrad debt-free before working as a probationer and parolee supervisor for a few years. Now he’s completing a doctorate in urban planning and environmental policy at Texas Southern University and faces about $250,000 in federal student debt for his master’s and doctorate.
Sorto is among a smaller group of borrowers with six-figure debt: About 7% of people with federal student loan debt owe more than $100,000, reports The Washington Post.
The Biden administration’s proposed student loan plan would reduce his debt by $10,000.
Juan Antonio Sorto is a doctoral student at Texas Southern University.
Source: Juan Antonio Sorto
In 2020, according to the US Bureau of Labor Statistics. However, borrowing for higher education has been a major driver of the growth in federal student loan debt.
Sorto is still excited about the professional doors his doctorate will open, but has grown disillusioned that grad school is worth racking up six figures in student loan debt.
“I hope this is just the beginning,” he says of the loan forgiveness. “There are still so many things to sort out in the system, including the cost of a college education, which just got ridiculously high.”
“I break the cycle of debt for my children”
Tina Gass was the only person in her immediate family to attend college – a feat that took her 20 years and cost her around $45,000 in student loans.
She began her undergraduate degree program in 1997 at the University of Nebraska, taking breaks to work and care for her children, before graduating from Bellevue University in 2018. Gass lives with her husband and two children, ages 11 and 9, in Omaha. , where she works as Director of Call Center Operations for AAA.
The 43-year-old still has around $18,000 in loans to repay, most of which are private – she expects she will be eligible for $3,700 in relief under the administration’s loan forgiveness plan , the rest of his federal student loan debt.
Even that amount will lower her monthly loan payments and help her start saving for her children’s college education.
What so often gets lost in the conversation about student loan forgiveness, Gass says, is how canceling that debt isn’t just helping borrowers — it’s enabling millions of people to build generational wealth. for their families.
“I’m breaking the cycle of debt for my kids,” Gass says.
“Getting a degree has given me a more comfortable lifestyle and a career that I love, but how can I convert that so that my kids don’t have to make the same sacrifices I did and are not not struggling with the same debt that I, and so many other people in this country, continue to struggle with?”
Check:
Student debt experts say $10,000 isn’t enough specifically for black borrowers — here’s why
Student loan forgiveness: Borrowers could see relief before December, Biden administrator confirms
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