Student loan debt today
A look at the numbers behind student loan debt
Going, going, gone?
On August 24, 2022, President Joe Biden announced the U.S. government will wipe out up to $20,000 of federal student loan debt for Pell Grant recipients and forgive $10,000 for other eligible borrowers. The move itself could completely erase the balances for nearly 20 million individuals.
This new student loan plan applies to qualified Americans who earn under $125,000 per year, or less than $250,000 for married couples who file tax jointly. In addition, the student loan pause, which has suspended all payments and interest on federal student loans since March of 2020, was also extended to December 31, 2022.
Prior to Biden announcing his forgiveness plan, student loan debt in the U.S. totaled around $1.7 trillion.1 To put that number in perspective, $1.7 trillion is enough money to cover the costs of 24 million American households for a whole year.2
And while the new provision may provide financial relief for millions of Americans, student loan debt will remain for many others.
If you still owe money on your student loan, and are deciding whether to pay it off or invest, or struggling with your loan payments, or looking for ways to make repayment easier, you have options.
- The government offers several income-driven repayment plans designed to help low-income borrowers avoid defaulting on their loans.
- You may also benefit from consolidating your loans. This process combines multiple monthly bills into one, potentially making it easier to stay on top of repayments. Note that consolidating can result in losing any credit you’ve earned toward forgiveness programs like Public Service Loan Forgiveness.
- If you feel your interest rate is simply too high, you can also try refinancing your loans through a private bank. If you do so, note that you’ll lose the protections that come with federal loans.
Invest wisely with an Empower Investment Account
1CNBC, “Biden cancels $10,000 in federal student loan debt for most borrowers,” August 2022.
2 U.S. Census Bureau, Guzman, Gloria, “Household Income: 2018,” September 2019.
3 Pew Research Center, Cilluffo, Anthony, “Five Facts about Student Loans,” August 2019.
4 U.S. Department of Education, “Federal Student Loan Portfolio,” December 2019.
5 Pew Research Center, Cilluffo, Anthony, “Five Facts about Student Loans,” August 2019.
6 Federal Reserve Bank of New York, “Who Is More Likely to Default on Student Loans?” November 2017.