Mastering Your Student Debt Journey in Biden’s Proposed Forgiveness Plan and Beyond

YOUR GUIDE TO MANAGING YOUR FUTURE DEBTLOAD
Every year, a large number of new students fall into the student loan system while existing borrowers struggle to get out. This year, President Biden’s proposed plan for student debt forgiveness could potentially clear debts for millions of individuals as early as this autumn – just in time when freshman college goers begin accumulating further loans on their path towards earning a degree.
Graduating high school students heading off to four-year universities can anticipate borrowing up to $37,000 (on average) for the acquisition of a bachelor’s degree. Once federal student loan limits are reached, families often turn to parent loans and private financing in order to afford their children’s education.
Tuition fees have more than doubled over the past two decades – currently standing at $11,260 per academic year (for 4-year public colleges), for the average student. For students enrolled at four-year private universities, annual tuition now exceeds $41,540.
“Tuition has been increasing faster than inflation for decades and incomes have not kept up,” said Sandy Baum, senior fellow at The Urban Institute’s Center on Education Data and Policy. “It is a serious problem.”
Without any form of financial assistance or student loans available, tuitions, room expenses (lodgings), transportation costs, book fees and other associated charges can reach close to $100k for four-year institutions.
With college education expenses outweighing earnings over recent years, families increasingly rely on federal and private aid programs in order to cover the mounting bills. “Tuition and fees is less than half of total costs,” said Ellie Bruecker (interim director of research at The Institute for College Access and Success).
According to Sallie Mae’s annual How America Pays for College report, released in 2021; family income as well as savings were utilized almost equally for college expenses – accounting for approximately half the costs. Scholarships (free money) made up more than a quarter of these expenditures while student loans covered most of what remained.
Scholarship programs are crucial sources of funding, yet only around 60% of families utilize them; those who did received an average scholarship amounting to $8149 in the previous year. Those that didn’t receive scholarships reported not having applied for any.
To obtain college financial aid, students must first submit a Free Application for Federal Student Aid (FAFSA), commonly known as FAFSA.
The FAFSA serves as “the gateway” to all federal student loan and grant money – including loans, work-study opportunities, scholarships, grants etc. This is the most sought after kind of aid due its zero requirement for repayment.\
Problems with this year’s new FAFSAs have dissuaded many high school seniors and their families from completing the application.
By April 12th (of the current year), only around 29% of the class of 2024 had completed FAFSA – a decline by roughly 36% compared to last year’s statistics.
As enrollment deadlines loom closer, fewer students are deciding upon their pathways towards earning scholarships.
“Even if all [problems] had gone perfectly well this year,” Bruecker explained, “the financial aid system still does not hold the same purchasing power that it used to possess years ago.”
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