Local La Crosse college says historic student loan forgiveness provides temporary relief
Posted: August 24, 2022 6:29 PM
Updated August 25, 2022 9:26 AM
by Duaa Israr
LA CROSSE (WKBT) — In a historic decision, President Joe Biden announced Wednesday he will cancel $10,000 of federal student loans for anyone making less than $125,000 per year.
Some critics say the issue is not student loans, but the interest it accrues. According to the National Center for Education Statistics, in the past 40 years, the average cost of attending college has increased by 180%. Experts say while $10,000 in relief may seem like a lot, it does little to help future college graduates.
45 million Americans across the nation felt a weight lifted off their shoulders as President Biden announced his plan from the Roosevelt Room Wednesday.
“For most of the clients we work with, the $10,000 is all or maybe half of their loans,” said Michael Swartz, owner of La Crosse Financial Planning.
Under President Biden’s 3-part student loan relief plan, if you received Pell Grants you would be eligible for up to an additional $10,000 in forgiveness — for a total of $20,000.
“More is always better from a forgiveness standpoint, from a personal financial perspective,” Swartz said.
At Western Technical College, 65% of students receive some form of financial aid.
“The amount of financial aid students can receive hasn’t kept up with the cost of education,” said Jerolyn Grandall, a financial advisor at Western Technical College.
Grandall says while loan forgiveness is a historic gesture, the bigger issue is interest. Interest rates on federal loans can be anywhere from 3% to 7%.
“Every three months they’ll add interest on the principal. Eventually you’re paying interest on interest. It just gets out of hand,” she said.
Grandall says the forgiveness is a band-aid over the larger issue of financial aid reform.
“You know, you can forgive $10,000 or $20,000 now, but then in the future, other students are going to have issues in the future as well,” Grandall said.
Swartz says the aid helps low-middle income families and will have little impact on the economy.
“This will have a lot more effect on relief from constricting dollars than it will direct impact on spending dollars on the consumer side,” he said.
For people with large student loan balance, Grandall says people should talk to a financial advisor.
“Don’t just ignore them, because you’ll need to pay them off, but there are different programs that will help,” she said.
If the President’s plan means you will soon be debt-free, Swartz says look into building long-term wealth.
“Building that emergency fund or saving for a down payment on a house. Get that next goal in mind and keep being intentional with your money,” he said.
The cancellation does apply to current college students as well, but if they are dependents, it will be based off their parents’ income.
The Education Department will release more information about how borrowers can claim relief in the upcoming weeks.