President Biden’s plan to have the government absorb billions in student loans is a win for some but not for all the 43 million or so Americans saddled with debt.
“Many student loan borrowers will welcome this forgiveness, but for most, it won’t wipe out all their student debt,” said Stephen Dash, founder and CEO of Credible, which is majority owned by Fox Corporation.
The average student loan balance is around $40,000 federal and personal, he noted.
Biden’s “Student Loan Debt Plan” rolled out Wednesday will cancel $10,000 of federal student loan debt for select borrowers making less than $125,000 per year and up to $20,000 for Pell Grant recipients. The move, however, is expected to add to the nation’s already bloated national debt, which hit $30 trillion last year.
UNDERSTANDING PELL GRANTS
The plan also extends the pause on federal student loan payments through the end of the year.
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“People with remaining federal student loan balances can continue paying on them through the pause, which will reduce the amount they’ll owe — and be charged interest on — when payments ultimately resume” Dash explained.
Additionally, these same individuals can take the opportunity to refinance their debt before interest rates rise even higher after the Federal Reserve inked the second consecutive 75 basis point interest rate hike in July to tame red-hot consumer inflation sitting near 40-year highs.
Some economists are expecting a similar move in September.
“We expect another outsized Fed hike in September, but post that we would look for the Fed not to surprise the markets on the hawkish side again,” strategists at JPMorgan led by Mislav Matejka wrote.
“Private student loan rates remain competitive, especially for parent borrowers, borrowers with federal graduate student loans and people with good to excellent credit,” Dash offered.
Good to excellent credit scores range from 670 to 800-plus, according to Equifax. Refi rates for student loans can range from as low as 1.87% to above 8%, per Credible.
Credible is majority owned by Fox Corp., parent of FOX Business and Fox News.
FOX Business’ Megan Henney contributed to this report.
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