After around two years of student loan payments being on pause, Peoria area borrowers are looking down the barrel of an Aug. 31 deadline to begin ponying up again.
Joe and Amber Bohannon are a Peoria area couple who took different educational paths. Joe is an educator and has gone back for two master's programs. Amber has two associate's degrees.
Amber’s degrees include funeral directing and embalming; she currently works as an autopsy technician.
However different their jobs, they share the experience of paying off student debt.
“Highest point it ever got was probably $75,000,” said Joe. “And mine’s much lower,” said Amber. “I don’t really remember what I started out with. Sadly, I still owe about $16,000.”
Despite these differences in educational experience and total debt, Joe said the payment moratorium has been a boon to them both.
“There were some months, since Amber wasn’t working a lot during the pandemic, where we had to make some choices on what to pay,” he said. “And it was nice to have that ability to not have to worry about that big bill that hits both of us each month.”
The Bohannons said they don’t have children, but they do have pets. The ability to not have to worry about an emergency medical or vet bill crashing their budget was a relief. This feeling isn’t uncommon, something you’ll hear from borrower assistance organizations like the California-based Student Debt Crisis Center.
“We polled tens of thousands of student loan borrowers and what they told us was that this type of government relief was the most important relief they received during the pandemic,” said Cody Hounanian, executive director at the Crisis Center. The organization advocates for student debt relief and, critically, helps educate borrowers on how to manage their debt.
“Student loan borrowers, just by the nature of being students, are some of the brightest, most inquisitive and curious people among us,” said Hounanian. “Yet, by the millions, they have struggled to understand this complex and convoluted student loan system. That should tell you exactly how problematic, how difficult it is to navigate this complex federal program.”
He said this is particularly difficult during this unprecedented freeze, as major changes at federal loan servicing companies have led to borrowers like Joe Bohannon losing track of where their loans even are.
“I even went on to look to see how much I had, but they had already switched everything over and my account with them was completely blank,” he said about his original servicer, Great Lakes Educational Loan Services. “So until I hear something from federal loans, I have no idea how much I have to pay, when I’m going to start paying it back. Yeah, kind of in the dark.”
According to the student loan management conglomerate Nelnet, they’re now the owners of Great Lakes Educational Loan Services. Until Nelnet sends some sort of communication to Bohannon, there’s no clear way for him to know the status of his loans.
The Student Debt Crisis Center argues that situations like Bohannon’s demonstrate a clear need for an extension. The confusion is far from the only reason.
“As we look out into the world and we see skyrocketing inflation, you know, food and gas prices greatly increased, we think that this extension should continue much further,” said Hounanian. “We have been hearing from borrowers, they’re not financially ready to resume payments. They’re looking at Aug. 31, which is the deadline for the end of this relief, as a financial cliff.”
Approaches during the freeze also can vary from borrower to borrower.
John McAuley has around $70,000 in student debt and has been using the freeze to save and invest in rental property.
“I found that I could just cash flow my student loan payment out of rental property,” he said. “So eventually, I can pay my loans off for half price. So it’s been a huge boon to us.”
McAuley never finished his bachelor’s degree, but has been working in computer science for 10 years. He echoes something the Bohannons said: students shouldn’t be afraid of higher education outside of “traditional” four-year universities.
“I would say that an associate’s degree is really important, in fact, I think it’s more important than a bachelor’s. That might end up being a wildly unpopular opinion,” said McAuley. “But the reason I say that is this: an associate’s degree teaches you how to think, right? It exposes you to a broad range of topics and forces you to think in different ways and make new connections that weren’t there before.”
No path is going to be right for everyone and, depending on who you ask, the solution to the $1.7 trillion problem of student debt is different. McAuley, as a borrower, favors a “middle of the road” approach.
“If you look at 0% interest as a solution, it kind of works out like this: the people that have these massive student loan debts, they’re making payments and the loans are still growing because of the compounding interest,” said McAuley. “If we put it to 0%, they’ll be able to pay down the principal.”
McAuley said a solution like this avoids making those who already have paid off their loans feel cheated.
For the Student Debt Crisis Center, broad cancellation is the path forward.
“This relief, regardless of how it impacts the macroeconomics of our country, has a real-life impact, a day-to-day impact on these families. It allows them to really afford the necessities they need, it frees them financially,” said Hounanian. “These are the things that everyday people really care about.”
As both Hounanian and McAuley also pointed out, there hasn’t been any economic catastrophe as a result of student loan payments being on hold, so far.
Whatever the future of student debt in America, the two-year payment freeze has materially changed the lives of some borrowers, including those in our community. The end of that freeze could mean new financial challenges for those families.
But additional help may be on the way. According to NBC, President Biden is expected to make an announcement about the payment freeze and potentially some student debt cancellationas soon as Wednesday.
