Student loan holders may see further assistance

It might not be until the new year that those with student loan debt will have to resume their payments, after COVID-19 dramatically reshaped the economy and employment.

Millions of federal student loan borrowers — owing a total of $1.7 trillion across the country — have been able to suspend loan payments since this summer without seeing any negative consequences. They also haven’t accrued interest. Those already in delinquency or default don’t continue to see garnishments on their wages or tax refunds seized. And their balances won’t continue to grow.

“They can focus on more important issues in their personal financial life,” said Andrew Pentis, a student loan counselor with Student Loan Hero.

Citing a recent Student Loan Hero study, he noted that these adjustments haven’t been helping borrowers save money, but have helped with purchasing essentials.

“It was just showing that what they would have put towards their student loans was now being put toward essentials like groceries,” he said. “That points to the importance of this moratorium and how helpful it’s been for struggling families.”

In Delaware, there are 121,000 borrowers, with a combined student loan debt of $4.5 billion. The average borrower owes around $37,000, over the national average of around $30,000.

“Obviously, you can imagine if you’re 22 coming out of college and staring down at that balance that can feel overwhelming for someone who may not have a direct career path, particularly in 2020, where the job market has obviously been affected by the pandemic,” he said.

In early December, U.S. Secretary of Education Betsy DeVos extended the loan forbearance through Jan. 31, but there has been talk of expanding that again until April.

The huge sum of student loan debt nationally can be attributed to several things, Mr. Pentis said, including the rising cost of college, rising college attendance and — “most notably,” he said — the government’s involvement in how college is paid for.

“Most recently, over the last decade, the Department of Education (has become) the primary lender and holder of student loans in this country,” he said. “The vast majority of that $1.7 trillion figure is education debt that is owned and managed by the Department of Education.”

Regardless of when forbearance ends, it will have a significant impact on people of color, he said.

Nine out of 10 Black students hold federal student loans, he said, compared to seven out of 10 White students. Black student loan lenders borrow more and higher amounts, he said.

“When you layer in the context of not only the existing racial wealth gap in this country, but also the pandemic, you can see that the end of the moratorium would disproportionately affect families with those existing challenges, such as a lower average household income,” he said. “If you look at the overall picture, there are certainly many borrowers who could survive OK without this moratorium, but certainly there are millions of borrowers across the country who are counting on it.”

President-elect Joe Biden has been vocal about his support of student debt-relief initiatives. However, Mr. Pentis urged borrowers to not wait on relief to arrive from Washington, whether via payment suspension or forgiveness.