Interest on federal student loans began to accrue for borrowers in September, and payments are scheduled to commence on October 1. James Kvaal, the U.S. Under Secretary of Education, joins Yahoo Finance Live to discuss the federal initiatives that will help people in the United States pay down their student loans, including President Biden’s SAVE proposal.
The cost of college is becoming a concern for families as well as students, according to Kvaal. “People who are still paying off their student loans frequently struggle to start a business, buy a home, or pay for the education of their children, so this really is an issue… that affects families, communities, and really the economy as a whole.”
Kvaal goes into detail regarding the difficulties that put borrowers at danger of loan default as well as updates to the FAFSA forms.
JULIE HYMAN: After a three-year hiatus, federal student loan payments will start up again on October 1. These student loans have been accruing interest since the beginning of the month. And as they struggle with years of payments and thousands of dollars in debt, millions of Americans are yearning for some relief.
James Kvaal, the undersecretary of education for the United States, and Ronda Lee, a reporter for Yahoo Finance who focuses on this topic closely, are now joining us. What do debtors need to know, Mr. Undersecretary, as we look at this payback process finally starting up again? What should people be aware of?
Congress did, in fact, end the student loan payment moratorium. Payments are due in October, therefore bills will be sent out then. And we strongly advise folks to check into all of the feasible repayment methods.
The SAVE Plan, the most cheap payback programme ever, was developed by us. There are already 4 million people there. Additionally, we have made a lot of effort to improve the loan forgiveness programmes we have provided, such as Public Service Loan Forgiveness. We’ve identified 3.5 million people in total for loan forgiveness. Therefore, visit StudentAid.gov to see what possibilities are available to you.
Ronald Lee Just wanted to chat to you about FAFSA, undersecretary. When it comes to student loans, this is typically where borrowers start when applying for college. Following that, individuals complete the free financial aid form to determine how much they must pay and how much their parents must donate.
Student loan: Education official explains what borrowers should know
There are significant changes coming to the FAFSA. Can you elaborate on that? What may a borrower anticipate? What is going on with FAFSA? And when will they be able to use that new application?
JAMIE KVAAL Yes, we are really happy about the FAFSA modifications. We are putting into effect some bipartisan legislation that will greatly simplify and facilitate the process for students and families. Additionally, it will make the form more advanced.
There will be more students who qualify for Pell Grants in the future. And so, when we introduce the new form later this year, both of those things will be feasible.
BRANDON SMITH On the flip side of this, there is the simple issue of education costs and how much of a household decision this is as much as an individual one. So how is the government ensuring that those up-front charges that families must consider and, for the purposes of the discussion we’re having right now, incur a significant amount of debt over as well?
To reduce future education costs, we’ve put in a lot of effort. The increase in Pell Grants is the largest in a decade. Additionally, we are identifying those institutions who charge students debts they cannot afford to pay back. Many of them are for-profit institutions, and new regulations will soon be released to hold them more accountable for that.
Ronald Lee Speaking of for-profit institutions, statistics show that 50% of students who default attend these institutions. Can you please elaborate a little bit about the Fresh Start initiative to help those in default regain good standing? Let’s also discuss with borrowers what they must do, including calling their loan servicers, in order to be ready for October 1.
Yes, I agree. I appreciate the inquiry. Therefore, a million people were defaulting on their college debts each year prior to the student loan freeze. These kids are predominantly first-generation, low-income, and students of colour.
Additionally, if you have student loans that are in default status, it can be quite expensive and punishing. Consequently, we developed the Fresh Start programme. Everyone now has the chance to begin repayment after the break and embark on a fresh start, just like other students do.
And we’re requesting that people choose to engage in this programme by calling their student loan servicer or visiting StudentAid.gov and selecting a repayment option. If you have a loan that is in default, you should definitely do that.
HYMAN, JULIE: Do you guys have a goal in mind when it comes to debt and higher education in this nation in the long run? Do you want to get to the point where there are no students taking on debt to pursue higher education? How are you approaching this in broader terms, exactly?
JAMIE KVAAL Yeah, well, in terms of attempting to improve the student loan programme and make it more reasonable to repay your student loans, especially if you work in public service, have a consistently low salary, or become disabled, we’ve made a lot of progress. The second stage is to invest in the upfront costs of college, and for this, free community college and tripling the Pell Grant are important. And while those objectives are lofty, they are doable. They are funded by the president’s budget.
The third stage is to determine the source of all of this unmanageable debt. And for-profit institutions do account for a disproportionate amount of it. We must examine the programmes that are disengaging kids.
Can we make our value to students better? Or do we need to use scholarships or other forms of funding to support those programmes?
BRANDON SMITH We appreciate James Kvaal, the undersecretary of education for the United States, and Ronda Lee. We appreciate your participation in Student Loan Week.
Yes, James Kvaal.