Amy Pollick | Wealth of Geeks
The U.S. Supreme Court is set to rule on President Joe Biden’s plan to forgive $400 billion in student loan debt later today. The program would forgive up to $20,000 in debt for individual borrowers.
ABC News reports the decision could affect more than 40 million Americans. The Biden Administration announced the plan in September 2022. The order was challenged by six states, arguing it overstepped executive authority and unfairly disqualified some American borrowers.
Student Loans by the Numbers
About 43.8 million Americans have student loan debts totaling $1.757 trillion, according to the Education Data Initiative. A study conducted by CreditDonkey revealed students in Maryland have the highest rates of student loan debt, with an average of $42,543 per borrower. Georgia, Delaware, and Virginia aren’t far behind, with an average of $41,826, $39,238, and $39,001 in student loan debt per borrower, respectively.
The top 10 states in student loan debt cover states across the map; debt isn’t proportionately worse in a single region. Virginia, New York, Florida, Oregon, Illinois, California, and Alabama round out the states with citizens owing the most in student loans.
South Dakota borrowers owe the least in student loans, averaging $28,218 per borrower, followed by Iowa with $29,845 per borrower, and Alaska, where students owe about $30,427 per person. The following seven states on the lowest loan list are North Dakota, Wyoming, Wisconsin, Nebraska, Arkansas, Indiana, and Oklahoma.
Paying Every Day … or Month
College costs are rising, along with nearly everything else. A CreditDonkey spokesperson said, “It’s no secret that the cost of a college education has soared over recent decades, with the average price of tuition, fees, and room and board increasing by 169% for an undergraduate degree between 1980 and 2020.”
Most borrowers can be out of school for six months before making loan payments. While some students work while in school to pay their tuition or loans, most will have to pay off their loans after earning their degrees. Education Data Initiative says most students pay about $503 per month, and it will take about 20 years after graduation to pay off the debt. Not surprisingly, those with advanced degrees have more obligations, with doctoral students paying as much as $1,100 per month based on income.
At an average 6% interest rate, EDI reports, students will accrue about $27,000 in interest alone over those 20 years, and up to 42% of the loan payments go to interest rather than the principal amount on the loan. The bright spot is that student loan interest rates are at an all-time low, enabling more borrowers to pay their loans off in 10 years or so.
Easing the Financial Burden
Parents and students can consider some action steps to help reduce the student loan load. U.S. News and World Report says the first step is for students to complete a Free Application for Federal Student Aid. The application opens on October 1 every year, and the sooner schools receive the FAFSA, the better the chances are a student will receive a need-based scholarship or grant.
More options for decreasing student loan debt include: paying into a 529 college savings plan, local scholarships, financial aid appeals, no-loan schools, employer tuition assistance, Advanced Placement and dual enrollment, prior learning assessments, ROTC programs, and regional tuition exchange programs.
Finance experts recommend students use the federal student loan program if they must borrow money to complete their education. This program usually offers lower interest rates than private borrowers, such as banks or credit unions.
With so much cash on the line, it’s no wonder Americans are anxiously waiting for the SCOTUS decision. In fact, CreditDonkey said, the plan “is one of the most expensive executive actions in history.” U.S. citizens must decide for themselves whether this is a good thing or not.
This article was produced by Media Decision and syndicated by Wealth of Geeks.