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Federal student loan payments to be due September
President Joe Biden is expected to propose a loan forgiveness plan soon. FOX 26 Consumer Reporter Heather Sullivan has the smart sense you need to know.
After a more than two-year pause, Federal student loan payments will finally come due on September 1. And President Joe Biden is expected to propose a loan forgiveness plan soon.
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President Biden's loan forgiveness plan could provide some relief for 40 million borrowers, but many say the system needs to change.
"I would get these letters, and looking at the amounts, I would just be balling," said Jamy Valadez.
Despite years of payments, 63-year-old Jamy Valadez says she's been wrestling with accruing interest on parent student loans for her sons, and her own student loan for nearly 20 years.
"I think my total loans are about $135,000 between the three of us. Of that $135,000, I think I have well over 40% in interest," she explained.
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40,000 federal student loan borrowers will receive loan forgiveness
A report by the Government Accountability Office (GAO) highlights errors in recording payments that would qualify borrowers for loan forgiveness.
Valadez is worried about retiring, as her Income Contingent Repayment plan means paying more than $1100 a month.
"It’s all my cash. That’s my money that I live on after I pay my bills," she said.
She's not alone. The Federal Reserve reports 45 million Americans have federal student loan debt.
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President Biden is expected to propose a loan forgiveness plan soon, that, according to reports, could mean $10,000 to $50,000 in forgiveness, that may include Direct, graduate, and parent loans, for people earning up to about $125,000 to $150,000 a year.
Republicans just proposed the REAL Reforms Act, which would cap interest accumulation to 10 years for borrowers who make consecutive payments but phase out the Public Service Loan Forgiveness program.
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Debt Relief Attorney Leslie Tayne says don't wait for forgiveness. She says to prepare for the pause on payments to end on August 31.
"Now is the time to contact your servicer and make sure they have your up-to-date information," said Tayne. "Not only a billing address, but your email address as well, and up-to-date financial information."
Valadez says she accepts her debt, but she says the system needs to change.
"It's my debt, I own it," she said. "It’s not that I didn’t want to pay them. It's not that I defaulted. My credit is important to me. I've worked really, really hard to get to where I am."