With tensions heightening for many borrowers as the federal government prepares to resume student loan payments at the beginning of next year following a pandemic-induced pause, more than 130,000 Rhode Islanders received an opportunity for at least some relief in August.
Under a Biden administration student loan relief program, borrowers making less than $125,000 individually, or $250,000 as a household, can apply for up to $20,000 in debt cancellation if they took out Pell grants, while non-Pell grant recipients can be relieved of up to $10,000. In some industries, borrowers may be able to erase additional debt.
The plan has ripple effects that extend well beyond individual borrowers’ finances, observers say, with Rhode Island borrowers potentially set to feel these effects more so than in other areas of the country.
This relief will be “transformational for tens of millions of people,” said Ben Kaufman, director of research and investigations at the Student Borrower Protection Center in Washington, D.C., a nonprofit organization that tracks student debt and advocates on behalf of relief measures.
“When payments restart on student loans in January, 20 million people who would otherwise have to start choosing between other necessities and their student loan bills won’t have to make that choice,” Kaufman said.
Around the country, the Biden administration estimates that 43 million borrowers will have at least some debt relief under the plan, while 20 million will have their debt completely erased.
Within the Ocean State, the plan could eliminate $830 million in student loan debt, offering at least some relief to 131,280 residents and completely erasing loans for 63,420 residents, according to the Student Borrower Protection Center.
“The cancellation action corrects for that and is going to allow people to start building more financial footing, some for the first time in their adult lives,” Kaufman said. “It’s going to have ripple effects that will possibly impact every area of American life.”
That’s good news not just for borrowers but for the health of the state’s overall workforce and economy, says Daniel P. Egan, president of the Association of Independent Colleges and Universities of Rhode Island.
A relatively high number of Rhode Islanders may also stand to benefit from a section of the plan that awards extra aid to those who work for nonprofits, the government or the military, Egan says, as the student loan forgiveness plan allows individuals in these sectors to have up to all their debt erased if they meet other eligibility requirements.
“It’s a benefit of where the economic engines lie in Rhode Island, which is in health care, education, nonprofit and government,” Egan said.
Another section of the plan focuses on an income-based repayment program to make loans more manageable for current and future student borrowers, which Kaufman says may incentivize more students to consider college, as enrollment rates continue to decline throughout the U.S.
This aspect of the plan states that borrowers will not be required to pay more than 5% of their monthly income on undergraduate loans; eliminates monthly payment requirements for borrowers making $15 per hour or less; forgives loan balances after 10, rather than 20, years of payments for those with balances below $12,000; and covers unpaid monthly interest.
While Egan supports the debt cancellation plan, he doesn’t anticipate that it will significantly affect enrollment rates, as it focuses on those who have already taken on student loans. But he thinks of it as a starting point.
[caption id="attachment_417351" align="alignright" width="300"]
DEBT RELIEF: Under the Biden administration’s recent student loan relief program, $830 million in student loan debt can be eliminated in Rhode Island, offering at least some relief to 131,280 residents and completely erasing loans for 63,420 residents. Pictured are students on the Brown University campus in Providence.
AP FILE PHOTO/STEVEN SENNE[/caption]
Likewise, President Joe Biden’s plan has faced criticism from those who say that it fails to address the root cause of the student debt crisis, which stems from skyrocketing tuition and fees.
State leaders need to focus on lowering college expenses for current and future students, Egan said, noting that Rhode Island’s financial aid programs have failed to keep up with inflation and lag behind Massachusetts and Connecticut.
“Over time, budgets haven’t kept up in Rhode Island in terms of aid,” Egan said. “States are really not into funding higher education to the level we have in the past, and in the Northeast it’s clearly a peril because we have talented high school graduates departing the region for school elsewhere and potentially staying elsewhere.”
As a result, Rhode Island could be losing invaluable members of its workforce to states that offer more robust financial aid packages, Egan says, and enticing more students to attend college in Rhode Island would help to improve the state’s long-declining enrollment trends, which have started improving based on schools’ early fall enrollment projections.
Most institutions within the Ocean State are anticipating increased enrollments from the previous academic year, with some colleges seeing record-setting first-year attendance, including Providence College and Bryant University, PBN reported in August.
“Students who attend an institution in Rhode Island are more likely to stay here postgraduation and be part of our workforce,” Egan said.
Kaufman agrees that the plan is a step forward, rather than a solution to the $1.75 trillion student loan debt issue in the U.S.
“There’s a lot of work to do on every aspect of the student loan system for federal and private student loans,” Kaufman said. “We’re going to continue pushing for more debt relief, for more pathways out of debt for student loan borrowers and for a student loan system that’s more centered around the borrowers themselves.”
With the federal payment pause on student loan payments expiring on Dec. 31, the Biden administration advises borrowers to apply for relief by Nov. 15.
