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President Biden Announces New Student-Loan Forgiveness Plan To Help Millions

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President Biden’s new student-loan plan will help relieve millions of Americans from debt. 

According to an article from The Wall Street Journal, the President’s new plan will eliminate up to $10,000 in federal-loan debt from those whose annual incomes are under $125,000 or for couples who earn less than $250,000 combined. 

“In keeping with my campaign promise, my Administration is announcing a plan to give working and middle class families breathing room as they prepare to resume federal student loan payments in January 2023,” President Biden tweeted.

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Some of the borrowers are also going to be eligible for total forgiveness up to $20,000 if they additionally received Pell Grants. These are a form of federal financial aid that would be awarded to students who live in low-income households.

“The plan is expected to benefit the majority of the more than 43 million people in the U.S. who hold a total of $1.6 trillion in student-loan debt” 

President Biden also announced that he will be extending the pandemic-era student-loan pause payments and interests throughout the end of the year. The Trump administration first gave Americans the option to suspend their loans and soon after, Congress made it automatic. 

The current pause was set to end on Aug. 31, but with the President’s recent plan, it was the closest the administration has come to hitting the end of the freeze extension.

This pause has been instated since March 2020 and has been continuously extended since. 

The Federal Reserve Bank of New York believes that this continuous pause helped Americans save nearly $200 billion in payments. 

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People who are eligible for this new plan don’t need to take action right away in order to receive the debt relief. 

“It’s a very complicated process and it’s going to take months to effectuate,” said Scott Buchanan, director of Student Loan Servicing Alliance. “Don’t do anything until you see something happen to your account.” 

The new plan was in fact narrower than what he initially proposed when he was campaigning during the 2020 election. 

“He’ll get a lot of credit for following through on something that he was committed to,” said Celinda Lake, a Democratic pollster.

Many people who work in the public service were also welcomed to some relief when there were temporary changes made to the U.S. Public Service Loan Forgiveness Program. Due to the changes, it helped more than 113,000 people receive student debt relief and have a total of $6.8 billion in forgiveness. 

Young College Student

Biden Administration To Erase Student Debt For 40,000 Borrowers

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In an attempt to make good on the promises of federal student debt relief, the Biden Administration — announced by the Department of Education on Tuesday — has made changes to the Public Service Loan Forgiveness Program (PSLF) that would see 40,000 borrowers become eligible to have their debt immediately discharged.

7,000 borrowers with older loans will also see forgiveness under income-driven repayment (IDR) plans. On top of that, 3.6 million more will move closer towards forgiveness by receiving at least three years of additional credit.

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The department, which cited that this move addresses “historic failures” in regards to IDR plans, also aims to take more care of accurately tracking monthly payments for borrowers on IDR, which are typically smaller amounts.

“Student loans were never meant to be a life sentence, but it’s certainly felt that way for borrowers locked out of debt relief they’re eligible for,” U.S. Secretary of Education Miguel Cardona said in a statement. “These actions once again demonstrate the Biden-Harris administration’s commitment to delivering meaningful debt relief and ensuring federal student loan programs are administered fairly and effectively.”

The Biden administration had previously extended the payment pause on student loans  — which was set to end on May 1 — through the end of August. Interest on loans has been paused since the start of the COVID-19 pandemic back in March of 2020.

Since President Joe Biden took office in January 2021, around 725,000 of the 43 million federal student debt borrowers have seen their debt discharged, which totals to over $17 billion in relief. Still, total outstanding student loan debt remains at $1.7 trillion.

IDR plans have had a troubled past. An NPR investigation revealed that the plans — which promise loan forgiveness after 20 to 25 years and manageable monthly payments as low as $0 — had been “badly mismanaged” by the department and loan servicers.

Department documents dating back to 2016 acquired by NPR showed that despite 4.4 million borrowers having repaid for over 20 years, only 32 had their loans canceled under IDR. Meanwhile, some servicers weren’t tracking payments, and didn’t know when borrowers qualified for cancellation unless they were asked by the borrowers to do an intensive records review.

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The department, along with Federal Student Aid (FSA) noted it will address “forbearance steering” by conducting a one-time account adjustment in order to count certain long-term forbearances, which the department considers to be more than 12 consecutive months or 36 cumulative months. Borrowers will then be given credits based on their length of forbearance.

Throughout his election campaign, Biden promised to forgive each borrower $10,000 in loans, which would end up totaling to about $400 billion. However, that claim has yet to flourish, as Biden stated he didn’t have the executive authority to cancel up to $50,000 debt per borrower. White House press secretary Jen Psaki later said the President would be “happy to sign” legislation canceling student debt if Congress passes it.

Along with pausing student debt (and expanding the coverage of the pause) Biden has worked to give relief by targeting smaller groups. One such case includes those who were defrauded by their school, which ended up totaling $2 billion in loan cancellation.

Millennials Buying Home

Why Millennials Are Buying Fewer Homes

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Millennials are currently the largest group of consumers in the US, and as such have a significant impact on businesses and the economy, an impact which is sure to grow stronger with time. As such, millennials are the frequent subject of speculation about their lifestyles and spending habits, and much has been made online of their supposed “killing” of various industries. Various stereotypes of millennials abound; they are thought of as having short attention spans and problems committing to jobs, but are also recognized for their desire to feel a sense of purpose and community in their professional lives. Whether or not millennials differ fundamentally from other generations when they were the same age remains an open question, but as the spending habits of young people influence various industries, businesses will have to adapt in order to meet the demands of their newest generation of customers.

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One such industry is real estate. For various reasons, millennials seem less likely than their parents’ generation to want to invest in purchasing a home—according to a ValueInsured Modern Homebuyer Survey, only 48% of millennials think that buying a home is a good investment. This is a sharp decline from two years prior, when 77% of the same generation believed in the value of purchasing a home. Many explanations have been proposed for the downward trend in millennials’ view of the value of real estate, but one popular theory is that millennials are a generation that values experiences over products, preferring to spend money on ephemeral things rather than physical objects. This theory has gained significant traction among people who seek to understand changes in young people’s spending habits, particularly when it comes to their reluctance to make expensive, permanent purchases like real estate.

When millennials are asked about their views on homeownership, however, the answers they give tend to refute this belief.

However, other theories have been proposed that have less to do with the unique characteristics of the millennial generation and more to do with external pressures. The previously mentioned survey offers different explanations for millennials’ reluctance to invest in homeownership. For instance, 49% of first-time homebuyers are concerned that rising mortgage rates could cause homes that are affordable now to become unaffordable in the future. Other economic anxieties factor into this reluctance to buy houses; 67% of first-time buyers worry that they will be unable to save enough money to buy a house they actually want to live in, and 52% believe that a home they buy now is likely to drop in value within a year. Additionally, 68% worry about the threat of another housing crisis, and 64% worry that they’ll suffer from buyer’s remorse after purchasing a home.

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Despite the reality of these widespread economic anxieties, however, many believe that millennials simply choose not to buy houses because they prioritize investing in experiences. When millennials are asked about their views on homeownership, however, the answers they give tend to refute this belief. One of the factors that delays homeownership for the millennial generation is the burden of financial obligations like student debt, which has exploded in recent years, and the slow rate of wage growth over the past several years. However, research has shown that when these financial burdens are lifted, such as when a person finishes paying off their student loans or gets a higher-paying job, rates of homeownership among millennials increase dramatically. That being said, even when the financial burdens faced by millennials are taken out of the equation, many millennials still can’t afford to buy a house. This is because the price of housing has also increased. And while a handful of millennials have taken to a “digital nomad” lifestyle, living in a mobile home and working remotely, this trend appeals to only a small number of people, as such a lifestyle can become immensely difficult both for social and practical reasons. In fact, this trend is likely driven not by millennials’ unique interest in experiences over things, but rather by financial difficulties, as the lifestyle of a “digital nomad” is one of the more affordable ways to live. Nevertheless, the myth that millennials’ spending habits are driven by preferences for experiences rather than financial difficulties persists, and continues to serve as a justification for blaming this generation for killing any number of industries.

Millennials Buying Home

Millennials Face Difficulties Affording Homes

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For many Americans, a key part of the American Dream is the ability to save enough money to afford a home. But for millennials, many of whom are currently at a point in their lives where they’d like to move out of their parents’ house or their apartment and own a piece of real estate, a number of factors can make this dream seem to be an impossibility. According to the Urban Institute, just 37% of millennials owned homes in 2015, down eight percentage points from Gen Xers and Baby Boomers when they were a similar age. If millennials owned homes at the same rate as previous generations, there would be around 3.4 million more homeowners today. And although 9 out of 10 millennial renters would like to purchase a home, only 4.9 percent say they plan to do so in the next year, and 34 percent anticipate waiting five years or more before being able to buy real estate. Among millennials who want to own a home but are unable to do so, 3 out of 4 cite affordability as the reason, with many citing a lack of savings for a down payment and the burden of student loans as contributing factors.

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The causes for millennials’ problems affording homes are multifaceted. Whereas many Baby Boomers were able to attend public colleges and universities without having to pay for tuition, most Millennials did not have the same luxury, instead having to borrow tremendous amounts of money to pay for educational costs which, despite offering a value which has remained stagnant over the past several decades, have grown substantially faster than the rate of inflation. Because a higher percentage of millennials attended university than previous generations, the value of a college degree has diminished, as employers have a wide variety of choices for hiring well-educated candidates. And while millennials’ paychecks have roughly the same purchasing power as those of Americans living 40 years ago, the average cost of housing has more than doubled in that time. It has been estimated that, at the current rate, it will take the majority of millennials twenty years to save enough money for a down payment.

The financial burdens imposed on millennials dreaming of owning a home extend beyond stagnant wages and student loan debt. The cost of renting an apartment is substantially greater than it used to be, and because of the generation’s difficulty earning money, financial institutions are more reluctant to grant credit to millennials, with 58 percent of millennials being denied credit, compared to 35 percent of prior generations. Millennials are also less likely to own stocks than other generations were, as a result of having come of age during the Great Recession and becoming skeptical of the stock market as a result, causing many millennials to miss out on some of the major benefits of the recent economic boom. As a result of these economic problems, some forecasters predict that real estate agents will have difficulty selling houses in the future, as millennials replace Baby Boomers as the country’s largest generation.

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Other factors discouraging millennials from homeownership are also at play. Millennials are the most racially diverse of any current American generation, and homeownership is more valued culturally among caucasians. Additionally, millennials are waiting longer than their parents and grandparents to get married and have children, as the marriage rate among young people has dropped from 52 percent in 1990 to 39 percent in 2015, delaying the urgency of owning a home. Also, millennials tend to prefer to live in cities more so than prior generations, where the cost of living is higher and purchasing a house is out of the question. As a result of economic changes over the past several decades, the demographic among millennials most likely to own a home are those who can earn more due to having a college education and come from a wealthy background, as they can borrow money from their parents to supplement the cost of a down payment. As houses are frequently the most valuable financial assets Americans own, not owning a house has a negative impact in a person’s overall ability to accumulate wealth over time. Additionally, intergenerational transfer of homes is likely to increase wealth disparity between races of millennials, as minorities are less likely to own and be able to inherit homes.

Though these prospects seem grim, a number of solutions have been proposed to help with the problem of home affordability among the younger generation. One proposed solution is to invest in programs teaching young people about the finances of homeownership, encouraging people to start saving up for a home from a younger age and increasing awareness of programs designed to help people afford homes. Another proposal is to update the criteria that creditors use to evaluate millennials’ suitability for loans, taking into account their rental, telecom, and utility payments. In any case, whether you’re interested in buying a home soon or not, it’s always a good idea to make sure you’re keeping good track of your finances and have a smart, realistic plan for your future.