Crystal Lake resident Lauren Iverson-O’Malley recently took a $20,000 per year pay cut, which stressed her finances and had her worried about paying off her student loans.
Being in the mortgage industry, which she described as “feast or famine,” the first few years of her career were at a time when the market was strong. Now, the market is correcting itself, she said, causing a famine. And despite her pay cut, she was still going to have to pay about $400 a month in student loans starting in October, something she said she couldn’t afford.
Now, with plans announced to cancel $10,000 for borrowers of federal student loans, along with a pause on payments through 2022, she feels she can breathe a little easier.
“Having the opportunity to have forgiven $10,000 to $20,000 would cut my payments down enough that I could probably be able to afford them,” she said.
President Joe Biden announced Wednesday plans to cancel $10,000 in federal student loan debt for individuals making less than $125,000 per year and families making less than $250,000. Those who received a Pell Grant, which are given to those with the most significant financial need, will see an additional $10,000 canceled.
The cancellation is expected to wipe out about the debt of about 20 million people. More than 43 million people have federal student loan debt, with an average balance of $37,667.
Biden is also extending a pause on federal student loan payments until the end of 2022.
James Sitko, regional project director for the McHenry County Economic Development Corporation, said he currently owes less than $10,000 in student loan debt. He will be eligible for Biden’s forgiveness plan.
After graduating from Illinois State University in Normal in 2018 with a political science degree, Sitko, speaking as an individual separate from his role at the county, said the extra money in his account will bring him peace of mind.
“I am not going to have to worry about spending money on that, not checking my banking account constantly,” he said.
Measuring the impact, Sitko said his student loans were like “having another mouth to feed.”
“It is money that you make every single month but that you don’t ever see. It is sitting there until the payment is due,” Sitko said.
While he’s happy for those helped, Woodstock attorney Matt Haiduk said he doesn’t think it will solve the main issue, which has been the rising cost of tuition in recent decades. On the whole, he said there’s a large population of young professionals who won’t be helped by this.
“I think what Biden is doing is basically ridiculous,” he said. “I’m happy for people that are going to get relief out of this $10,000, but for me, ... it’s a political show.”
Haiduk said he borrowed about $60,000 to go to law school, but due to interest, he now owes more than the original amount despite having paid on them for two decades. He said combined he and his wife owe about $300,000.
McHenry High School teacher Stacy Rockweiler graduated in 1998 and paid her loans off while living at home. As an English teacher, Rockweiler said she’s thrilled about anything encouraging students to go to college. She said for many of her students, college is not an option at the moment because of the cost.
“This is something to be celebrated,” she said. “I don’t think it is enough, but I hope that this is the beginning for resolution for our young people.”
Despite the benefits, some, like Sitko, worry about the long-term effect of forgiving loans. As someone who works in economic development, he sees a reality where colleges raise tuition rates further since the government is guaranteeing the loan now.
“[In my] microeconomic world, it helps me out,” he said. “In the macroeconomic world, there are worries.”
If the plan goes into effect, it will mark the completion of one of Biden’s campaign promises from 2020. Legal challenges are expected to come, and those opposed say it’s an unfair to those who have already paid off their debt. They also note that those with college degrees are often the highest earners.
Haiduk said he thinks Biden promising this will open the door for this to be an issue in every election going forward.
Rockweiler said she didn’t see it was unfair even to those who had already paid off their loans.
“Wouldn’t they have wanted that help when they were struggling?” Rockweiler said. “Of course, they would have taken advantage of that.”
Iverson-O’Malley said she can see both sides of the issue. While she called the student loan programs “predatory,” she said she understands it is the responsibility of those who hold the debt to pay it. Biden’s plan also won’t wipe out all the debt, she said. Instead, it will help out.
“We weren’t really ever taught what our futures would look like with these payments,” she said. “We were promised ... we would get good jobs. That has not panned out for our generation.”
This was something Haiduk agreed with as well, saying he doesn’t blame the students.
Those benefiting from the cancellation will also be closer to buying a house or newer car, or choosing to have a child, he said.
“They will be closer to making larger financial decisions,” he said.