The State of Student Debt
41 million Americans have gotten a financial reprieve over the past two years since it was announced that they didn’t have to pay principal or interest on their federal direct student loans.
A slightly higher 43.4 million Americans have outstanding federal loans in total, the Department of Education reports, but not all are eligible for the moratorium. As of the fourth quarter of 2021, federal student loan borrowers owed a total of $1.6 trillion in outstanding loans, according to the Education Department.
The student debt moratorium was originally passed as part of the CARES Act to help the economy and consumers weather the severe downturn at the start of the pandemic. It’s been extended several times, but now it’s set to expire on May 1, that is unless it’s extended yet again.
After the Trump administration extended it and the Biden administration extended it, the moratorium on student loan repayment was finally set to expire last month, but it was extended again.
Some argue that with the economy almost fully recovered, there is no longer a need for the halt in payments, and on the other side of the aisle, there are those who are arguing that the economy is still faltering with inflation and the like.
And then there are those who are speculating that canceling the debt entirely is another option still on the table. With all this uncertainty surrounding the subject, it is no wonder that there are concerns for many people who benefited from the moratorium.
One thing we know for sure is that The Education Department recently instructed federal student loan servicers not to inform borrowers that payments will resume on May 1, according to an email first reported by Politico. This signals that there is a high likelihood of the deadline being extended once more.
Federal student loan debt has become a significant political issue as outstanding payments continue to hamstring millions of Americans’ finances, and the President’s promise to cancel $10,000 per person didn’t go as far as proposals from some of his supporters, which aimed to largely abolish federal student debts.
No matter how this all plays out, college financing is still a reality and a need for many American families. According to a Sallie Mae study, only 39 percent of families have a plan to pay for college tuition. That means that the remaining 61 percent of families are left having to take out loans to cover the costs.
The bottom line is that planning ahead with enough time to effectively set aside money for college will reduce stress and boost your financial well-being overall.
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