SIOUX FALLS, SD (KELO) – The Biden administration has decided to extend the break in student loan repayments until May 1. This is a further extension of the moratorium that began in March 2020 due to the pandemic.
Undergraduates in the United States have an average student loan debt of $ 30,000. That’s an average payment of $ 400 per month.
“It is the children of the working class and the popular classes who must take out loans in order to pursue the American dream. That’s right, to be all they can be. To try to have some upward social mobility, ”said Reynold Nesiba, (D) Sioux Falls and professor of economics at Augustana University.
“Borrowing is an important part of what students and families do when they go to college, especially at the graduate level, unless you get a refund from your employer or a payment from your. employer, ”Scott Pohlson, vice president of enrollment at the SHU, said.
For a year and nine months, the government suspended federal student loan repayments and prevented interest from accumulating on them.
“It’s money that ends up being reused in our economy,” Nesiba said. “People use it to pay their rent, they use it to buy groceries, to pay their medical bills, to honor other debt commitments. And so when that debt is canceled, that’s a really powerful thing. “
Biden has said as a presidential candidate he will forgive student loans during his tenure. But what would happen to the economy if these debts were canceled?
“The economists at the Levy Institute did a simulation of this, I think in 2018, and by the time they estimated a complete cancellation of the student loan, it would generate $ 108 billion,” Nesiba said. “Up to $ 108 billion over ten years in terms of overall GDP and they thought that would also reduce the unemployment rate based on the simulation they did.”
South Dakota State Senator Reynold Nesiba is Professor of Economics at Augustana University in Sioux Falls. He says canceling that debt would be like a tax cut.
“In this case, most of the debts of the last twenty years or so have really been transferred to the education ministry,” Nesiba said. “Either the Ministry of Education providing these grants or the Ministry of Education acting as the debt consolidator. Much of this debt is owed to the federal government, so it actually looks like a tax. It looks like a tax with a fairly high interest rate, the payments of which the federal government has been deferring for the past few years. So being free from those obligations is like lowering someone’s tax. “
For now, however, the loans are on hold until May 1. Scott Pohlson, vice president of registrations at USD, provides advice on what you could do with your loans in the meantime.
“I think the best advice I would give to you as a person who, again, is in debt to myself, is that you have to somehow assess whether or not you want to keep paying this, don’t isn’t it, ”Pohlson said. “So if you want to take the principal amount of the loan and pay it back, now is a great time to do it because you don’t pay interest. You almost double the bet if you think about compound interest.
It says to make sure you understand what type of loan you have.
“So if you’re in a loan forgiveness plan, like an income-based plan, they might forgive those months in the future depending on how your income grows or what it ends up being,” he said. said Pohlson. “So you kind of have to call your debt provider. Really understand what are the pros and cons of this.
The 40 million Americans in debt for their student loans have felt the impact of the moratorium.
“And right now, these debts are really a drag on the economy for young people,” Nesiba said. “Okay, if you have high debt levels, it delays marriage, it delays buying a house, it delays buying a car, appliances or furniture. is just restrictive in terms of spending.
“About a third of all students with debt are in default,” Pohlson said. “And so, you can have, like the wage garnishment, the tax refunds withdrawn. So I think it’s more of a third party valuation is that a heavy burden? Yes, for many, but there are so many variables within that I think, in my opinion, that any sort of debt relief would be something that is going to require a lot more conversation.
The moratorium on student loans only applies to federal loans. Private student loans have yet to be paid at this time.