President Biden is expected to make an announcement regarding student debt this week, with hopes from borrowers that up to $10,000 per loan will be canceled. Roy Paul, the executive director of the financial literacy nonprofit Cents Ability, joined Cheddar News to talk about predictions regarding the announcement. "I think President Biden, playing the moderate person that he is, is really struggling with the idea that there are going to be millions of people who were quote-unquote left out of this process," he said.

Opening Bell

Student Borrowers Wait in Anticipation for Biden Announcement on Loans

Welcome back to cheddar is opening bell. Student loan borrowers are on edge as they pause on payments expires august 31st now this week, the Secretary of education confirmed that biden would announce whether he would extend the federal student loan payment pause for the record seventh time now. Meanwhile, lawmakers are urging Biden too broadly cancel up to $50,000 in student loan debt per borrower. However, the president has consistently pushed back on canceling that much. So here to discuss is Roy Paul, executive director at sensibility. Thank you so much for being here. So I gotta start off with, how likely is it that these payment pauses will be extended? Well, Shannon, I looked into my crystal ball and I predict that President Biden will extend the moratorium on loans as well as forgive. I think the $10,000 number seems to be what he's comfortable with. But I can't imagine a scenario where they have been sort of teasing this for several months and then to disappoint millions of people by saying they're not going to do anything. Well, you know, the administration has considered canceling $10,000 per borrower, excluding those who already earned more than $125,000 a year. So what's the latest on student loan forgiveness? And why is it challenging to forgive student loan debt? Yeah, I think President biden uh playing the moderate person that he is, is really struggling with the idea that they're going to be millions of people who were quote unquote left out of this process, right? You have millions of americans who over the years paid off their student debt. Uh, and there's no rebate for them in this potential plan. Uh, and as well as those who say, look, you know, there are people who go to school and they take out debt on their own. Why should the federal government in the business of bailing out people? Um, just because we're having tough economic times, I'll be going to forgive private car loans or we gonna forgive people's home mortgages. Um, and so when you start going down the road Rabbit hole of forgiving things, you know, what else are you going to forgive and who are you going to leave out? Well, one of the things that has helped the White House canceled nearly $32 billion dollars and loans largely from borrowers who were defrauded by their actual colleges, their for profit colleges and for those that are also permanently disabled, they were able to forgive them. So how could the crackdown on the education system cut down on student loan debt overall. Yeah, well, I think what we have to focus on is less about forgiving the debt and more about how to educate people and not to take the debt out to begin with, right? There is a lack of financial literacy in this country and many people go to college, They don't even know what their monthly payment is gonna be when they graduate in four years. And so yeah, you have a lot of students who've gotten defrauded by colleges through no fault of their own. You have people who are trying to get forgiveness through the traditional ways of paying the loans back over a period of time, The public forgiveness loan program. And they were essentially locked out of that process as well. But if you start with how to analyze what you can afford before you take it out, do you really need to go to a 50 or $60,000 a year school as opposed to a public University and pay maybe 50% of that. If you're gonna take out loans, try to mitigate your expenses. We've gone away from that conversation and that's where I think we need to be headed in the future. We also need to be headed in a way to fix the issues we have with these loans and many say that there's a long road ahead to fix the student loan system. So what do you see happening as the next steps? Yeah, the, the next step is going to be the forgiveness. He's gonna, he's gonna do the 10,000, they're going to extend the loans. But beyond that, they're gonna have to figure out how to make the process for forgiveness through the Department of Education much more seamless. Uh, and that really is, I'm sure they've done it a top down analysis on how to make sure that the right people are in the right programs and taking the right steps to get the right step to forgiveness. Once they do that, they need to have a broader conversation and around financial literacy education. But I think in the short term they will forgive the debt up to the $10,000. That's where he seems to be comfortable with. And then beyond that, they have to make sure that they take out the kinks in the system so that people can actually get the right program. Well that, hey, 10,000 is better than nothing. That'll definitely help a lot of people. But maybe there are programs out there, we just don't know about what programs are available for borrowers to lower their student loan payments, you know, of any um No, I think, you know, if you're in a public program like the federal government, that's really the best place to be at this point. But if you have a private loan, the best thing you can do is try to consolidate the loan, maybe negotiate your payment with your provider. But beyond that, um, you know, you you really are at your wits end in terms of options available to you once you have the debt. Uh it's really your responsibility in most cases to to pay it off. Okay, what about those people who just finished paying it off like they made their last payment recently? Are they gonna get any refunds for the money that they paid off, that they still would have qualified for this debt forgiveness, that they're giving back, uh, they will not, unfortunately, they paid off their loans too soon. Um, if that's the thing to be proud of, I don't know, but I'm sure there are many people who were hoping and praying that they knew this was coming down the pike much before the time that they paid off their loans. And that's, and also that's part of the sticking point here. Right? You know, how upset are those people going to be? I'm sure they're probably polling them to see if they're gonna be report voters or something, uh, to make sure that it mitigates the political impact to the president, but that's part of the consideration here is that this is not a fair system, right? Even in the unfair stuff systems, This is not a fair system. Yeah, there's a lot of people that are in default right now saying that same thing. This is an unfair system. So what tips do you get for those borrowers who are in default with their loans? If you're in default. Um, then you have to really contact your provider, uh, and try to mitigate your expenses. That's really the only thing you can do. Um, I know it's easy to say, you know, get more money, you know, diversify your income streams. That all sounds wonderful, but if you're not there than saying that to someone, uh, in that predicament really is gonna fall on deaf ears you have to contact your And make sure that you can make a payment plan. That's reasonable. And people think, Hey, if I contact my provider, they don't really care. They do. They do want their money and if your payment is $1,000, but you can only afford 500, they're going to take that because they really do want to get money back. Yeah, they say the same thing. Something is better than nothing. All right, Roy Paul. Always great to see executive director at sensibility. Thanks so much for those tips.