Page 12 - October 2022 Issue.indd

DOLLARS AND SENSE by Tolbert Rowe

Forgiving Student Loan Debt

President Biden, in a blatantly political Now the economy is looking vastly payments on other “stuff” that there isn’t

move, has relieved nearly 40 million different, almost recessionary. I much of. This logic is simply wrong and
taxpayers from the burden of repaying up say “almost” because by definition a doesn’t make much sense to me.
to $10,000 of their federal student loans. recession exists when the economy President Trump started the forbearance
And for those who received a Pell Grant, contracts or shows negative growth for train down the track in March of 2020
the forgiveness is doubled to $20,000. two quarters. We achieved this milestone and it has been extended seven times

This enhancement will especially benefi t in the first six months of this year, 2022. since, allowing 47 million Americans to

students attending Historically Black So, there it is, we are in a recession, or spend or save what they would have paid
Colleges and Universities (HBCU) since are we? on their loans. Inflation was impacted

approximately 70% of them qualify for All previous recessions we have endured with the very first payment that was not

Pell Grants. For those with student loan saw a contraction in employment, and being made by student loan debtors in

balances after the credit is applied the rising unemployment. During the fi rst March of 2020 and has been recharged
forbearance from making payments is six months of this year, which were with every extension.
being extended to January 2023, nearly the months of negative growth, the
three years from the last month they unemployment rate dropped below 4% There is one catch to this government

were required to make a payment. giveaway, your income in 2021 must
and has stayed around 3.5%.
According to President Biden, the have been less than $125,000 and
forbearance is being extended to give In all but one recession since World if you are married and filed a joint

those borrowers who will be left with a War II there was a period of higher return income cannot exceed $250,000.

balance on their student loans suffi cient inflation immediately before it. Infl ation $125,000 in annual income is over

time to prepare to make these monthly in January of 2022, the first month of $10,000 per month. Household income
payments. You know, the ones they the recession, was at 7% and steadily up to $250,000 is almost $21,000 per
have not made since February of 2020. increased to a historic high of 9.1 % month.
During this time, unemployment has in June. Again, the six months or two It is estimated that there are more than
fallen to historic low levels. Th ere have quarters of negative growth. 45 million Americans with student
been nearly two available jobs for every Now we have some economists and loan debt that totals over $1.6 trillion,
unemployed person for at least the last other “talking heads” warning that a number that has tripled in the last 15
6-8 months. The personal savings rate forgiving what is estimated to be $400 years. The White House tells us that 43

at one time exceeded 30% of disposable million in student loan debt will be million borrowers will benefit from the

income, mainly because of government another force pushing infl ation higher. cancellation, which is 95.5%. Roughly
subsidies and child credits. By encouraging debtors to spend the 20 million or 47% will see their balances
money they would use to make their disappear because they owe less than the
$10,000 and $20,000 thresholds. Using
these numbers there will only be two
million borrowers who will not benefi t
from the cancellation.
“Your Mortgage Consultant Since 1985”
Purchase or Refinance As if this isn’t enough largess to throw
at the electorate President Biden
is sweetening the income-based
repayment (IBR) plans where borrower’s
payments are based on their income
and at the end of 20 years, (10 years if
115 E Dover St. Ste 3 - Easton, MD they work in “public service”), whatever
tolbert@baycapitalmortgage.com C. Tolbert Rowe, balance remains is discharged. Currently
www.baycapitalmortgage.com NMLS Vice President/Lending borrowers must pay 10% of discretionary
182844 income, according to a formula, but this
is being reduced to 5%.
410-819-3005 / cell 410-310-3520
12