By Ella Ceron and Claire Ballentine
Anxious Americans with student loans are tired of waiting for action from President Joe Biden and taking matters into their own hands.
With about a month until payments are scheduled to resume, there’s still no word from the federal government about student debt forgiveness or another postponement. Borrowers already struggling with soaring inflation are searching for other ways to reduce their payments, skeptical that Biden will come to their aid.
A movement from the group Debt Collective called Can’t Pay, Won’t Pay is gaining traction. The group isn’t advocating for those with loans to blow them off. Instead, they’re trying to educate the public on established ways to lessen their monthly bill.
“We don’t want people to take a course of action that winds up harming themselves or their families,” said Thomas Gokey, an organizer with the group. Instead, they’re focused on buying borrowers time while they pressure the government for broader debt forgiveness.
The average borrower holds $37,500 in student loan debt. If they wanted to pay that off within 10 years, it would require a $420 monthly payment, according to Bankrate. But for those willing to jump through a few hoops, there are ways to pay less.
Here’s what activists and experts recommend:
Created in 2007, the Public Service Loan Forgiveness program is designed to relieve the debt burden of those who work in public service, including employees of the federal government and non-profit organizations. Borrowers must be employed full-time for a qualifying employer and make 120 monthly payments to be eligible.
The program is notorious for its complicated rules and high rate of denials. But in October, the US Department of Education unveiled new program rules. Under the updated criteria, borrowers can count past repayments on loans that usually don’t qualify for PSLF. Borrowers can also get credit for periods of repayment in which payments were late or smaller than the amount due.
The government expects that more than 550,000 people who have previously consolidated loans will qualify for the program. Even if you don’t think you will, it’s worth finding out for sure, said Chris Diodato, founder of WELLth Financial Planning in Palm Beach Gardens, Florida.
“I’ve had friends who worked at universities or hospitals and didn’t even think about those being non-profits,” he said. “It’s always worth checking.”
Students who attended for-profit schools that defrauded them may be able to have their debt wiped away. Those who believe they have been cheated or lied to by their school can apply directly with the Department of Education.
There’s some track record of this working: The government recently forgave $5.8 billion in debt for 560,000 people who attended the now-defunct Corinthian College, and another 200,000 borrowers saw a collective $6 billion forgiven as a result of the Sweet v. Cardona settlement.
“We’ve got 45 million people with student loans,” Gokey said. “If enough of us get organized and refuse to cooperate, we can fundamentally transform our economy.”
The income-driven repayment program is another option for low-income borrowers.
Under this program, the repayment amount is based on the difference between 150% of the applicable poverty level and a person’s annual income. One in three borrowers with federal loans are currently enrolled in some form of IDR. The system is rife with issues. Out of 70,300 loans that were still in repayment and eligible for IDR-based forgiveness as of late 2020, only 157 had been approved for forgiveness.
Even so, Gokey said applying for IDR can be a relatively low-risk option.
Stay in School
It’s counter-intuitive, but additional education is one way to put off student loans. Borrowers still in school are typically eligible for deferment, as long as they’re enrolled at least part-time.
However, be sure to read the fine print about interest, Diodato said. Some kinds of loans like direct unsubsidized ones accrue interest even while in deferment. Of course, more school means more debt for many students, which is likely not an advisable strategy.
More stories like this are available on bloomberg.com