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How Biden’s student-loan forgiveness plan might impact Virginia borrowers

People move through grassy area
More than 400,000 Virginians will see some sort of student loan debt relief following President Joe Biden's relief plan. (Photo: Courtesy Old Dominion University)

President Joe Biden announced the federal Department of Education will forgive up to $10,000 of student loan debt for people who borrowed from the government to go to college. Certain borrowers will be eligible for $20,000 worth of loan forgiveness.

It's a campaign promise that could affect millions throughout the country and more than half of all college graduates in Virginia.

Scott Kemp, a student-loan advocate, discussed the plan.

The following has been edited for length and clarity.

Mechelle Hankerson: Your position is fairly new. You started in 2018 to help borrowers navigate the loan and repayment process. Since that time, what have been some of the most common questions or issues Virginians face when it comes to student loans?

Scott Kemp: The most common issues that I've had in working with borrowers was related to loan forgiveness and in more specifically looking at the public service loan forgiveness. And lately, there have been some changes related to that.

And also, borrowers often felt that their college or institution did something wrong to them while they were attending. Those are all under the borrower defense to repayment loan discharge program. So, I guess loan forgiveness is probably the most common request that I have from borrowers.

Since the pandemic started, calls to forgive student-loan debt really started gaining traction. What kind of confusion has that caused among borrowers, if any?

Well, related to loan forgiveness, the pandemic actually kind of put the idea of it out of a lot of people's minds because they weren't making payments on a monthly basis. They weren't thinking about their progress toward public service loan forgiveness or income-driven repayment forgiveness. People put it on the back burner.

And now that the pandemic relief is ending and payments are restarting in January, people are scrambling and trying to catch up, and trying to figure out where they are with respect to loan forgiveness, where they send their payments. It's really ramped up recently. But in the pandemic, a lot of people just kind of put it on the back burner.

State data shows the average Virginia college graduate comes out of a four-year program with about $30,000 of student-loan debt. How does that impact someone's decisions after college?

Because that translates out to about $400 a month, if they're on a standard repayment plan, that impacts whether they can purchase a vehicle, purchase a home, make decisions about whether they stay at home longer than they did before. It's a burden.

Because of the flexibility of student loans, it's been problematic because people can then prioritize some of their other debt load that they have ahead of student loans and create a situation where as they're delaying their payments, their loan keeps growing because of interest capitalization. And I've seen that a lot lately.

Now, fortunately, during the payment pause, that interest has been frozen. But I'm hoping people realize that once they restart, they need to get back on track with that, so they don't get into that spiral downward that happens when you skip a few payments here and there.

Based on what we know so far about Biden's forgiveness plan, how does it address some of the most common issues you hear about?

Well, people assume that it's borrowers with $200,000, $300,000 in loans that are the problem. But the reality is that the majority of federal student borrowers have $20,000 or less.

So, when you look at debt forgiveness of $10,000 for all based on income or $20,000 if they have a Pell Grant, we're looking at probably somewhere about 400,000 Virginians that are going to get all of their loan forgiven and then many others that will get it minimized by a third or half.

So, it may not impact the whole portfolio, but it will impact a number of people.

Typically, those borrowers with $5,000, $10,000 in loans are also the students that didn't complete their degree. So, they have federal student debt and didn't complete the degree to be able to get the job to be able to pay it back.

It’s really going to help them kind of get a fresh start, get back on their feet and either go back to school or be able to reassess where their finances are and move forward.

How do you anticipate the complaints you get to change as forgiveness and other provisions start?

The other part of the announcement was about some longterm changes that they're hoping to make through the rule-making process that will hopefully make it easier for borrowers to understand what their repayment options are, what their loan forgiveness options are down the road.

The only concern I have is doing this one-time loan forgiveness option. Next year, when people are struggling, they're going to wonder, where is that $10,000 relief again and what kind of message it sends?

Obviously, it's going to help a lot of Virginia borrowers and a lot of borrowers across the U.S., but I think there will be some concern about whether this sets a longterm precedent that can't be maintained.

I think they're making changes, they're looking at increasing the Pell Grants, so people borrow less. They're hoping to fix it in the long run.

Based on state reporting, it looks like the average amount of debt students at Virginia colleges took on actually decreased between 2020 and 2021. What's happening there?

Enrollments did go down, but it was also a lot of the pandemic relief.

When there was more grant money that didn't need to be paid back, borrowers didn't have to take out as many loans. I don't think that's indicative of any kind of trends that we can see.

I think we really need to get out of the pandemic, get back into repayment and just see where it's going to go.

The other big positive was about the Fresh Start program, where borrowers whose loans were in default are now being given a fresh start and are able to get back into repayment — and get back eligible for federal loans, whereas they weren't before. And I think that'll have a lasting impact, as well and hopefully increase enrollment.

For Virginians who have student loans and who are also unfamiliar with your office, can you describe what kind of help you can offer them?

One of the things that I've learned doing this for almost four years is that student loans were the most complicated financial transaction that were developed. They've changed and evolved, not necessarily in simplification, but in complication over the years.

And so, in addition to borrowers that were looking for loan forgiveness, there's also just general confusion about understanding their repayment options and understanding what kind of loans they have, and why weren't they eligible for their pandemic relief?

The borrowers that I work with come to me and they feel like they don't understand the process, and it's a problem with them.

And I tell them, it's not you, it's them. It's the loans that are complicated and it's the loans that create the confusion. And so, more of it is just looking at their accounts, trying to help them sort through what their different options that they can then go back to their loan servicer and discuss and be an educated borrower.

Just really help them be aware of what all of their options are, so they can make good, informed decisions. That's what I hope to do for Virginia borrowers.

If I'm someone considering higher education — maybe I'm a high schooler who knows I have to pay for college on my own — what is one of the most important things to keep in mind as I'm looking at options to pay for school?

One of the things that we've done is we've created a student loan education course. It's called, and it basically helps incoming students understand all of their different options.

Whether it's loans, whether it's grants, whether it's scholarships — understanding what cost of attendance is, understanding what FAFSA is in order to be eligible, and really help them become educated consumers.

Because a lot of times these are 17, 18-year-old students who have never had to do any kind of financial transaction before. And all of a sudden, we're asking them to take out $5,000, $10,000 in loans and make all these commitments.

It is just about making them aware of their options, so that they can make good, informed decisions on their own and then continue that relationship as they're moving through into repayment and then into the real world.

They've got advocates like me, they have options, there are loans to make it affordable. And, you know, particularly for those students who choose a life of service — as much as we've heard about the public service loan forgiveness, some of the issues there have been with it in the past, it's a great program and it's a great opportunity for borrowers who do want to serve for a while and are worried about the amount of their loans.

There is help out there for the different paths they want to choose.

Probably the worst thing that you can do is just go into it and say, "I'll do whatever the financial-aid officer tells me to do. I'll take out all these loans, I'll do whatever." That's where the borrowers get into trouble.

To check your own eligibility for loan forgiveness, visit the Department of Education's website.

Read the original story at the WHRO website.