It’s been more than three years since the pandemic paused student loan payments. After hopes from many borrowers that loans might get canceled completely, repayments are finally set to restart at the end of September. That’s raising concerns with borrowers in Oregon and across the country.
“My loans were in default before the pandemic, and I want to go back to school. Am I eligible for these new repayment plans?” was one of a number of questions posed at an online meeting hosted by U.S Rep. Suzanne Bonamici, D-Oregon.
U.S. Rep. Suzanne Bonamici (D-Oregon) hosted a webinar last week to help walk Oregonians through the return to student loan payments.
Courtesy of the office of Congresswoman Suzanne Bonamici
Other participants asked about complications with switching repayment plans. Some worried they weren’t tech-savvy enough to find the help they needed online. Recent college graduates wondered about starting the process in the first place.
Bonamici’s webinar last week was organized to answer questions from long-time borrowers anxious about continuing their repayment plans, and for people who graduated during the height of the pandemic and haven’t had to make a first payment.
“Student debt is higher in the United States than almost any other country,” Bonamici said during the webinar. “Federal programs, grants, have not kept up with inflation and rising costs. High interest rates are something I’m very concerned about, and growing balances on student loan debt push borrowers into a deeper hole, and that makes repayment more difficult, if not impossible.”
According to a recent report from the Oregon Department of Consumer and Business Services, there are roughly 552,000 student loan borrowers living in Oregon with an average debt of about $38,000.
Bonamici acknowledged that many Oregon borrowers are probably disappointed by the U.S. Supreme Court shooting down President Joe Biden’s initial plan to forgive up to $20,000 in student debt. But, she said, there are still options to help lessen debt for some borrowers, including a new repayment plan from the Biden Administration.
Biden’s SAVE plan and other options
Following the Supreme Court’s decision to block Biden’s student loan cancellation proposal, the administration announced the Saving on a Valuable Education program.
The SAVE program bases borrowers’ monthly payments on their income level. But, it has some key changes that make payments more affordable for lower-income borrowers — like raising the income level requirements for borrowers to be able to make $0 in payments every month.
In previous repayment programs, the limit was 150% of the federal poverty level. With the SAVE program, that jumps up to 225%, according to Jessica Thompson, vice president for The Institute for College Access & Success — a nonprofit focused on research and advocacy for student public policy.
“So, if you are a single borrower and you’re making under $40,000 [annually], your payment will be $0 in this plan, but you will be in good standing, and you will be making progress toward your total repayment term obligation,” Thompson said during Bonamici’s webinar.
For many lower-income borrowers, their monthly payments were so low that they didn’t cover accruing interest, which meant that their loan balance continued to increase. The SAVE program also protects against that.
“In the SAVE plan, the federal government will be subsidizing the interest charges for anybody who is in that state,” Thompson said. “That means you won’t see those balances continuing to go up and to grow even though you are making your income-based payments. That is a really significant benefit.”
Some of the SAVE program’s benefits to borrowers won’t go into effect until next year, according to the U.S. Department of Education’s Office of Federal Student Aid. That’s when loans will start to be forgiven for people with original loan balances of $12,000 or less after making 10 years of payments.
“We tend to see this for community college students or students who tried college, maybe took out some debt but did not complete,” Thompson said. “We actually do know by data that those students [who didn’t earn degrees] struggle the most, even with very low balances, to be able to pay it off because they don’t receive the return on investment if they didn’t complete.”
Borrowers who had original balances of more than $12,000 can also get their loans forgiven, though with the period for forgiveness rising by one year for every additional $1,000 borrowed.
So, for example, if a borrower had a $13,000 original principal balance, they would see their loans forgiven after 11 years.
A new initiative called “Fresh Start” aims to help eligible borrowers who have defaulted on their loans re-enter repayment plans. It allows those borrowers to receive federal student aid. That’s especially helpful for people who want to go back to school.
As the U.S. Department of Education rolls out these new debt repayment programs, it is implementing a 12-month “on-ramp” to repayment, running through Sept. 30, 2024, to ease borrowers back in. People who miss payments during that period won’t default on their loans or face other financial consequences.
Other options like the Public Service Loan Forgiveness program, for people working with the government or for a not-for-profit organization, still exist.
As of the end of March, the most recently available data, nearly 9,000 Oregonians had been forgiven of almost $560 million in student debt through the Public Service Loan Forgiveness program, according to the report from the Oregon Department of Consumer and Business Services.
Resources for Oregonians, next steps
Both Bonamici and Oregon lawmakers are providing help for potentially confused borrowers.
Bonamici’s office has created a webpage covering the basic questions about returning to loan repayment.
The state hired its first student loan ombudsperson last year following the passage of Senate Bill 485 in 2021 which created the position.
“The Oregon Legislature created this position to help people that have student loans and can’t make heads or tails of all the information that’s flying at them,” said Mike Pierce, executive director and co-founder of the policy and advocacy nonprofit Student Borrower Protection Center.
According to the Oregon DCBS report, since the ombuds program started, the office has received more than 100 calls and emails from the public.
Along with reaching out to the ombudsperson, Bonamici said there are also case workers available in her office to help.
“We want this process to work smoothly, and hopefully someday we won’t need it because higher education we hope will eventually be debt free,” Bonamici said.
Bonamici said along with smoothing out the current process, there need to be long-term changes. She’s cosponsoring the LOAN Act, or Lowering Obstacles to Achievement Now. If passed, that legislation would increase the federal Pell Grant award for students, shorten the time for loan forgiveness for the Public Service Loan Forgiveness program and lower interest rates for new federal student loans.
“Education is a great investment and one of the best investments we can make as a country,” she said. “So, investing in education and giving people a path to higher education without debt is a top priority and something that’s good, not only for the people who are the students, but for our business community and our economy.”