Biden administration alters student loan programs 4/20/22 Transcript

Tanya: (00:07) The Biden administration has announced new changes to multiple student loan programs. Jim: (00:12) These changes are designed to give thousands of borrowers immediate relief from student loan debt and bring millions more years closer to having their student loans forgiven. Education department officials say 40,000 borrowers will be given immediate forgiveness. They also claim income-driven repayments will bring another 3.6 million at least three years closer to relief. Tanya: (00:38) Prior to Tuesday's announcement, the Biden administration had already canceled more than $17 billion in debt for around 725,000 borrowers. The White House had also extended the federal student loan payment pause to August 31st. Joining us now is Greg McBride. He's a chief financial analyst for bankrate.com. Greg, welcome. Great to have you with us. So, give us an idea of how significant an impact these changes will be for borrowers. Greg McBride: (01:10) Well, for borrowers that have been making their payments for years, Tanya, but yet through no fault of their own, their payments were not being counted correctly, they weren't being counted towards eligibility, or they had been routed to the wrong program. This can make a world of difference. It basically gets them back to their final destination of where they should have been even if the luggage went to the wrong place initially. So, this is going to be huge. There's legions of stories from consumers who, for one reason or another, they kept making their payments, they followed the rules, even when they were given incorrect information if they followed those rules. This kind of corrects a lot of those previous mistakes and puts them back on track. Jim: (01:48) All right. So, let's drill down a little bit. The Department of Education says the changes are designed to fix student loan and repayment programs and plans. So, I'm just wondering what errors were preventing so many people from getting more immediate debt relief, and, I guess, more importantly, how will these alterations make a difference, Greg? Greg McBride: (02:07) I think one example are when loans were shifted from one servicer to another, the left hand didn't talk to the right hand. So, borrowers were making payments, but they weren't being counted. So, going back and retroactively making the fix to count the payments that were made as getting them closer to the eligibility for forgiveness is going to be a huge change. Then, the forbearance programs that maybe a lot of borrowers had been routed into instead of income-based repayment, the balance continued to accrue. Interest continued to accrue. The balance continued to grow. Going back, making the adjustment, as if they had been in the correct program all along, can make a huge difference, as well. Tanya: (02:48) So, let me ask you about this consumer survey bankrate.com published earlier today. It found that roughly 60% of US adults have put off making important financial decisions because of their student loan debts. So, can you discuss the kinds of decisions they are delaying and what else this survey revealed about the impact of student loans on Americans? Greg McBride: (03:09) Yeah, what we are seeing 60% of adults and even higher for Gen Z and millennials, about 74% of Gen Z, 68% of millennials, say that they've delayed financial decisions because of that student loan debt. Most commonly, it was things like saving for emergencies, saving for retirement, buying a home, and then for Gen Z's, in particular, buying or leasing a car. Those are the type of decisions that tended to be deferred because they were servicing student loan debt, but on the flip side, we did see that about 60% of those that have had student loan debt said that it did open the door for them. It gave them opportunities that increased earning potential, and only 10% had the type of regret that said they wouldn't get the education all over again, if they had to do so. The changes people would make would be more around applying for scholarships, working more, getting a degree in a different field, or going to a different school, not skipping out on the education itself. Jim: (04:04) All right. Greg McBride, chief financial analyst for bankrate.com, we appreciate your insight. Thank you. Greg McBride: (04:10) Thank you, Jim.