George Kamel - Are Student Loan Payments Making a Come Back?

Episode Date: June 5, 2023

If you’re like most people, your student loans have probably been out of sight, out of mind for several years now. But the jig might finally be up... Guide to Getting Rid of Your Student Loans Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

If you're like most people, your student loans have probably been out of sight, out of mine for several years now. Kind of like that Peloton that you bought in 2020 because you thought you were going to be the kind of person who works out at home because you saw the video of Cody talking about how your plate of sizzling fajitas turning heads. Is that fajita plate still sizzling? But folks, the jig might finally be up for your Peloton and for your student loans. And what I mean is those of you waiting on President Biden's student loan forgiveness could be in for a rude awakening later this summer. You see, the Department of Education has issued guidance to student loan companies to begin collecting payments again come September of this year. And I know, some of you are thinking, well, don't just keep kicking the can down the road like they have been with every other deadline the last few years.

But it could actually be for real this time. Like, for real, for real. So we're going to get into the juicy details on what's been happening with student loan repayment right after we talk about the other person you owe something to. But hey, I'm not asking for your money here. I don't need actual payment. All I'm asking is for a little bit of respect. with that like, share, subscribe combo. Respect.

RESP-V-D. Find out what it means to me. Okay, let's take it from the top all the way back in 2020. You remember 2020, right? Megxit infamously went down. Hamilton was released on Disney Plus, and there was suddenly a right and wrong way

to walk down the grocery aisle. And because of the pandemic, people had lost their jobs or were furloughed and were having a hard time affording things like rent and food and utility bills, let alone their student loan payments. So in March of 2020, the government passed the coronavirus, aid, relief, and economic security act, C-A-R-E-S.

Or as I like to pronounce it, caress. What? Oh, it's, it's CARES? I thought CARES felt a little more on brand for Joe Biden. Come on, man. Get a life. So the CARES Act was meant to ease the burden on those who were hit hard financially through the pandemic. And the CARES Act paused federal student loan payments and dropped the interest rate for existing federal loans to zero percent.

Pretty sweet deal. And today, after three years, which has felt like 84 years, we've now seen the student loan relief measure be extended eight times, mostly based on how the economy was doing, which, if you've been paying attention, hasn't been great the last few years. I mean, eight times? The last thing to needlessly be extended eight times was Gray's Anatomy. And we're currently at 19 seasons.

How much more anatomy is there to cover? Oh. However, this latest student loan payment pause extension that was announced in November of 2022 was for a whole other reason. Are you ready for the tea? because we're about to spill it. So back in August of 2022, Biden announced a plan to forgive $10,000 of student loan debt

for any borrower who makes below $125 grand a year and an additional $10,000 forgiven for anyone who received a Pell Grant. That's up to 20 grand of possible forgiveness for any borrower with federal student loans, which amounts to about 43 million people who would at least get some of their debt forgiven. Now, up until now,

the only way to get your student loans forgiven was through one of the federal student loan forgiveness programs already in place, most of which were based on your job and the number of payments you made. And even if you apply for forgiveness using those programs, the chances of getting your loans forgiven are less than 8%. Which, to be fair, is still higher than Gile's rating on Rotten Tomatoes. Nice computer. The bar is low. While there had been talk of sweeping student loan forgiveness before, this August announcement was the first time things actually seem to make it past a promise stage. But are people really buying this promise? Or is this another case of the boy who cried

stood loan forgiveness, or in this case, the elderly man who cried stood loan forgiveness. While I went to the streets to find out what everyday people actually think. Are you hoping for forgiveness to pan out? I'm hoping, but I'm not hopeful. Do you believe it will actually happen? Do you think Biden can pull this off? No, I don't think so. Do you believe it would actually happen? No.

Because you just have little faith in the government getting things done, or what? Yeah, I kind of. Okay. Do you think it's going to happen? I don't know. I guess I maybe say maybe 40%. Give me a percentage, like 60% chance, 10% chance? Zero? 65%. Wow.

Okay, a little more optimistic. Hopefully, I don't know. 50%. It's a flip of a coin. It's a pretty much. Wow, you guys have a lot of faith in Uncle Joe. Come through, bro. Come through.

Please. Don't let these people down. As you can see, the hopes are not high. And on top of the hopes being low, there's a catch to all of this. Student loan forgiveness isn't free. Biden's plan was estimated to cost the government $400 billion. And by the government, I mean the taxpayers, because that's how the government makes money. Which caused a lot of people to question whether the president can just forgive student loan

debt with the snap of his fingers. But hey, easy with those snaps, Joe, don't hurt yourself. Even Biden himself has gone back and forth on what he thinks he can actually do. And he's no stranger to going back and forth. Not to mention, former House Speaker Nancy Pelosi said this in July of 2021. People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone.

He can delay, but he does not have that power. That would have to be an act of Congress. Sounds a little negative, Nancy. So how is Biden promising this? Well, by citing a lovely little loophole called the Heroes Act. And if you're wondering what Heroes stands for, it's Health and Economic Recovery Omnibus Emergency Solutions Act. And that's Mr. Health and Economic Recovery

Omnibus Emergency Solutions Act to you, sir. Now, the part of that that throws me off is Omnibus. Isn't that one Ms. Frizzle used to help the kids explore the human anatomy? And why does it take 19 seasons, Shonda? It took Ms. Frizzle one episode to cover all the anatomy. Okay, tangent over. The Heroes Act. So the Heroes Act was created after 9-11 to give student loan relief to those serving in the military.

Great cause. And it allows the Secretary of Education to, quote, wave or modify any statutory or regulatory provision applicable to the student financial assistance programs to help borrowers during a national emergency. Now, that was a lot of high. high-brown mumbo-jumbo, but basically it just means that the Secretary of Education can make changes to the federal student loan program if it will help borrowers get through a financial crisis.

So that's Biden's loophole here. But what changes can actually be made? Well, that's up for debate. Kind of like if Kid Rock's music is actually music or if it should legally be considered noise pollution. In fact, the Heroes Act has been used in multiple ways over the years, including this very student loan payment pause I'm talking about right now. So if the Heroes Act is flexible, then what's the problem here? enter a little something called the Major Questions Doctrine.

This states that any interpretation of a vague law that would cause a major economic or political impact needs to go through Congress. And I think we could all agree that $400 billion would have a pretty big economic impact. So fast forward to November of 2022 when the last extension was announced. Up to that point, President Biden was all set to have federal student loan payments start back up in January of 2023. But he was also counting on his student loan forgiveness plan to have gone through by then, which was wishful thinking on his part.

Has he not seen the government? Things don't just happen, Joe. It all depends on what you mean by happen. And his plan still hasn't happened due to legal challenges. But because so many borrowers were waiting to find out whether a portion of their loan would be forgiven, Biden made the call to extend the payment pause until things were sorted out. And either way, federal student loan payments will resume 60 days after a decision is made. And if there's no decision by June 30th of 2023, payments will resume 60 days after that,

a.k.a. September of 2023 at the latest. Which remember is when the Department of Education advised student loan companies to start collecting again. But what's more, the Department of Education has never before in all the eight extensions given student loan companies a statement like this. Which is why I'm telling you, the payments are making a comeback, people.

Don't be surprised, and don't call it a comeback. So it won't be long before your student loan payment is in your face and coming out of your bank account once again. And that's a problem, because over the course of the last three years, people have made financial decisions based on not having a student loan payment. They bought houses and cars and Taylor Swift tickets, which are more expensive than cars, not to mention the financial impacts of inflation.

As of August of 2022, only 1% of people continued to pay their student loans out of close to 43 million borrowers during the pause, meaning the other 99% have gotten used to have in an extra $400,000 or so every single month over the last three years. Which explains why 92% of fully employed student loan borrowers are concerned that rising costs will make it harder to afford their payments once they kick back in. And this is going to ruin a lot of people's finances. But hear me say, it doesn't have to be that way. So if you've spent the last three years waiting on the sidelines, waiting on forgiveness,

neglecting your payments, what should you do now? Well, first things first, start paying back your student loans now. I know. You may still be asking if you should wait on forgiveness, but think about it this way. The average student loan debt in America is over $39,000. And that's just the average. Some of you have way more than that. Which means even if Biden's forgiveness is approved, $10,000 might help, but it's not going to get rid of your debt completely.

Heck, it might even just be a drop in the bucket for some of you. Now, I got to say, I wish you would kept making payments the last three years at 0% interest. That way, your entire payment would have gone directly to the principal, knocking down those student loans and getting rid of them faster. And if you're wondering why it's such a big deal to pay back your loans as quickly as possible, let's look at the math. If your student loan is around the average of $39,000, with a monthly payment of about $400 at 5.8% interest, and it takes you 20 years to pay your loans off,

which is the average amount of time it takes borrowers, you will have paid over $94,000 in total payments on a loan that was $39,000 at graduation. That means you paid $55,000 in interest. That's more than the original loan was. In interest. Are you punching a hole in the wall yet? Please don't.

You can't afford the drywall repair because of the student loans. So figure out how you're going to fit your student loan payment back into your budget, which means you've got to be doing a budget to begin with. Next tip, make sure your loan servicer has your correct information. A lot has happened over the years. Maybe you got married.

Maybe you submerged your phone in toilet water and had to get a new number. Maybe you move closer to family and then moved away again to get away from family. Again, a lot may have changed in the last three years. So double check that your loan servicer has all your correct info before the first payment is due. The last thing you want is to be late or default on your student loans over some technicality. And guys, it's super easy to update all this information. Next time your retitting conspiracy theories, just tab over, to student a.gov to view and update your info.

And don't be surprised if your loan servicer has changed since you last made a student loan payment. The federal student aid office works with multiple loan servicers and it's really common for companies to toss loans over to another servicer like a hot student loan potato. So if that happens, you should get a letter or an email letting you know about the switch

and you might need to create an online account with that new loan servicer. The bottom line, make sure your payment history and balance are correct, so you're not stuck paying more than you actually owe. And then I promise you'll get back to rediting the latest UFO sighting accounts in no time. Wow, it's like I'm back home.

What did you pay for this spaceship? Now, even if forgiveness happens in some form, it's not a get out of jail card, it's just a reduced sentence of a few months. Yeah, that's great and all, but you're still in jail. Your payment might go from 400 bucks to 350 bucks, but it's still another payment weighing you down and holding you back from building wealth.

Now, either Biden will forgive student loans by the end of the year, or it'll be decided in court. We don't know. But one thing we know for sure is this. Nobody should plan their future around promises made by politicians. Waiting on the government to fix your life is like waiting on subway seafood sensation subs to come back. It's not going to happen, and even if it did, it's going to get messy and smelly. And it might burn a little, which the burning will subside, but the regret will not. So you can take control of your life, of your situation,

of your financial future. You don't need to be a slave to the headlines wondering will they or won't they? What we know is the current student loan forgiveness program is an epic failure, and politicians will continue to make big promises and campaign on student loan forgiveness as long as there's elections to be won. But I wouldn't be holding my breath about anything happening that would improve your financial situation. It's like the last episode of the TV show lost. It's going to take a whole lot of time to get there, and it's going to leave you sorely disappointed. By the way, oh, do we figure out what happened there? Were they dead the whole time? Was the island even real? Was it all in their head? Was it like,

an inception thing. And was Richard wearing eyeliner? I have a question. Where did he get eyeliner on the island? You okay? What happened? Anyways, if you're one of the 43 million borrowers carrying student loan debt, this part is for you. You're not carrying this debt much longer if I've got anything to say about it. You're going to pay that bad boy off. And I tell you that, out of confidence, because I did it. I was able to pay off $36,000 in student loan debt 10 years ago using a method called the debt snowball. And most people who follow the debt snowball method, they pay off all of their debt in 18 to 24 months on average, which is a whole lot sooner than whatever student loan payment plan you're currently on.

So if you want to get started with that, check out my free guide to getting rid of student loans. It's got a ton of tools and resources to help you get rid of your student loan debt for good. And as always, don't forget to hit the like button, hit the subscribe button to get more content like this, and share this with a friend who thinks student loans will always be dragging them down and give them some encouragement. All right, that's it for today.

Thank you guys for watching. I'll see you next time. Thank you.