Alaskans who are carrying federal student loan debt may soon feel some relief, based on a decision by the federal government to forgive thousands of dollars of debt for eligible borrowers.
Alaskans interviewed for this story said the pardon plan would allow them to invest in their future, from higher education to building homes.
For Terelle Sterling, 38, forgiveness means she can put more money into her retirement savings. She is still in school and studying to become a psychiatric nurse practitioner. Sterling, who lives in Wasilla, was in the military and used her benefits to pay for her education but still had to take out extra loans, she said.
She knew the pause on student loan payments was soon to end, which meant she would have to start making payments again. When the announcement came, it was like a weight on his shoulders.
“I could feel it,” Sterling said. “Even though I haven’t received it yet, I can feel it.”
The Biden administration announced last month that borrowers who earn less than $125,000 as an individual or $250,000 as a household will be eligible for $10,000 in federal student loan relief, or $20,000 whether they received a Pell grant. The move will affect up to 43 million people nationwide, Biden officials said.
About 67,300 Alaskans owe some money in federal student loans. That includes 23,000 Alaskan borrowers who owe $10,000 or less, according to federal data, meaning they could see their federal student loan debts entirely forgiven if they apply for loan forgiveness and meet the requirements. of income. The application should be available in October.
There’s a lot of confusion around which loans the program applies to and who is eligible, said Sana Efird, executive director of the Alaska Commission on Post-Secondary Education. The commission’s work includes assisting with financial access to education and administering the state’s scholarships and student loan program.
[Who qualifies for Biden’s plan to cancel $10,000 in student debt?]
The government only forgives federal loans, which means the announcement will not apply to Alaska state student loans. or private student loans. She said the commission is directing people to the federal student loans website, at studentaid.gov, for the most up-to-date information and to ask questions.
“I would really like to point out that this was just released,” Efird said. “It has just been announced. There are still details being worked out.
Along with the loan relief announcement, the Biden administration also said it was extending its pause on federal student loan repayments through the end of the year. Additionally, some federal borrowers may be eligible for a new income-based repayment plan.
The student debt actions, which reflect a campaign promise from President Joe Biden and were announced just months before the midterm elections, drew immediate pushback from some and roaring support from others. Republican opponents criticized the plan as unfair to people who had already paid off their loans and to people who had not gone to college. Some have also argued that the loan forgiveness program could contribute to already rapidly rising inflation.
Kevin Berry, an associate professor of economics at the University of Alaska in Anchorage, said concerns about inflation from the new program were overblown. No one was required to pay off a federal student loan in two years, so the forgiveness doesn’t change some people’s spending habits, he said.
Student loans have held some people back, causing them to delay major financial commitments like buying a car or house and getting married.
“That kind of relief might push some people to make some of those decisions,” Berry said. “And so we could see increases in consumer spending, which could potentially lead to slightly higher inflation. But I think either way that effect is probably close to a washout.
Even with the help, the plan won’t benefit everyone and may only pay off a small portion of what they owe.
For Karolina Pavic, 34, a civil servant living in Anchorage who has two types of federal student loans she’s paying off that continue to earn interest, the forgiveness plan “seems like an insult.”
“It feels like nothing has been forgiven,” she said. “It really feels like it was a temporary band-aid to get votes.”
The new Biden plan will cancel some of her loans, but Pavic will still owe about $25,000 in various loans — some, but not all, of which could be forgiven later if she continues to work in the public sector. And Pavic said she knew there were people with hugely larger loans than she took out.
“I think it’s important for different generations to realize how big our debt is,” Pavic said.
Briar St. Clair’s student debt will be entirely erased under the new rebate program. St. Clair, who works in the legal system and lives in Anchorage, graduated in May and said she plans to go to law school soon, which she can do without debt weighing her down.
“Nothing is final yet, but just thinking about not having to start those payments and also trying to meet living expenses is really nice,” she said.
St. Clair had not originally planned to take out loans. She worked full-time until undergrad and tried to pay her tuition out of pocket before dipping into her savings.
“I feel like there’s this idea that people who take out loans just do it because they’re lazy, and they just want to be like profiteers or whatever,” St. Clair said. “But that’s absolutely not the case.”
She said she didn’t want to get too excited about the plan, given the potential for legal challenges. But if it comes to fruition, St. Clair said, ignoring student loan repayments means she can pursue a job that improves her community instead of pursuing a job with the highest salary.
Like St. Clair, Sterling – the future nurse practitioner – said debt relief would allow her to invest in her own future. She put the minimum amount in her 401(k), but her employer will match what she puts in, and Sterling said with the loan relief, she thinks she can take advantage of that benefit better.
“I really need to start focusing on old Terelle,” she said. “I’m definitely more focused on retirement. I don’t want to work forever. I really want to retire one day.
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