How Biden’s student-debt relief is helping Philly-area borrowers: ‘I can pay rent and utilities’

For some of the 43 million federal student loan borrowers, President Joe Biden’s cancellation of $10,000 to $20,000 in student loan debt, announced Wednesday, could be life-changing.

“By itself, this will not fix a failed system. But this cancellation is an immediate step, the biggest single step we can take” to help student loan debtors, said Persis Yu, policy director and managing counsel at the Student Borrower Protection Center, based in Washington, D.C.

And she added that the program might have trouble reaching the potential chief beneficiaries of the forgiveness program: those who took out loans and didn’t finish school or those already in distress with loans.

“We know there’s a huge overlap between people who didn’t complete and who defaulted. And [the Department of Education] doesn’t have great contact information for defaulted borrowers” who likely are eligible for debt cancellation, Yu said.

The Delaware Valley represents a ground zero for America’s student loan crisis. Pennsylvania at one time ranked No. 1 in the nation for student debt load, with an average $36,193 loan balance. Pennsylvania has since slipped to No. 3 for average loan balance, at over $38,000, behind New Hampshire and Connecticut, based on the latest data.

And many unanswered questions remain. When will the debt will be forgiven? Will the plan be challenged in the courts? What will the final rules say? How many people will apply?

The Inquirer asked local readers to tell us about their student debt and what this plan means to them. Here are some of their stories.

Maggie Frymoyer, 23, a first-generation college graduate from Selinsgrove whose father worked in a home-products factory and whose mother was a secretary, didn’t understand the loans she would have to take out for college.

“My sister is a community college dropout. And that was about it,” Frymoyer said of her family’s understanding of college economics. “You just get caught up in the glitz and glamour of higher education and the loans come second-hand.”

Attending Ursinus College in Collegeville, Frymoyer graduated in 2021 with a 3.6 grade point average and degrees in political science and sociology.

She moved into Philadelphia and scored a job as an admissions counselor at West Catholic Preparatory High, earning about $45,000 a year.

Frymoyer hasn’t had to make payments on her $27,000 in federal student loans because of the payment pause during the pandemic. But she pays $385 a month on $45,000 of private student loans.

“When I started paying bills it really set in what that amount means in the context of someone’s life. The amount is so large that I can’t contextualize or understand what that amount of money means in the short term and long term for myself,” Frymoyer said.

Speaking Wednesday, the day of Biden’s announcement on the $10,000 forgiveness plan, Frymoyer was heartened but wished it was more. “I am not complaining,” she quickly added.

She thinks she will have to return to college for a graduate degree – leading to more debt – “to get anywhere constructive” with a good-paying job.

» READ MORE: How a Philly millennial couple paid off $150K in student loans, ahead of schedule

“This is a huge relief for me, since I have about $20,000 in loans, and I got a Pell grant. So this would completely cover my entire undergrad loan,” said Humna Chaudhry, 23, who graduated from Drexel University this past June. She grew up in the Somerton neighborhood in the Northeast, and recently moved with her husband to Detroit.

She won’t have $400 a month in loan payments, “and now I can pay rent and utilities. I moved and just got married. I’m one of the lucky ones. Some of my friends still struggle, they’re caught in the never-ending cycle. The interest rates rack up, and they’re back where they started.”

CJ Arayata graduated from college in 2009, straight into an economic recession. His parents encouraged him to go back to graduate school and “borrow the max. They thought it could take a while for me to find a job.”

Between scholarships, work-study and loans, Arayata left school with about $50,000 in debt from both college and graduate degrees.

“By 2014, I took an entry-level academic job, and I was in forbearance on my loans. I was deferring payment, but the whole time accruing interest.”

Once employed, he began paying back $600 a month — even throughout the pandemic — and determined that he has “easily paid back well over $60,000 including interest.” He consolidated all the loans in 2016, and his current balance is just under $10,000.

“This debt relief is surreal. It would help me so much,” he said. “Some friends are buying houses and having kids. Others are still single and not even close to buying a home. Overnight it feels like all those things are now open to me. Without this [relief], it would take many more years to pay off the loans.”

In 2020 he started a new job working as a data analyst, and doubled his salary. He continued to pay his loans, even while entitled to a payment and interest freeze during COVID-19.

“I don’t like debt — at all. My parents’ home was foreclosed upon since they couldn’t make the mortgage payments. So I’m debt averse. And now my goal is just to get it behind me.”

A 57-year-old veterinarian, Atif Nazir has three adult children, one of whom is still in school for a master’s program. He’s paying all of their student loans, and said the monthly bill “is the largest behind our mortgage.”

Nazir and his wife and kids live in Piscataway, N.J., and he said he traveled to Washington, D.C., several months ago to meet with local representatives and ask for $50,000 in debt forgiveness — instead of up to $20,000. He’s a volunteer with the U.S. Council of Muslim Organizations, and said the group traveled specifically to speak with members of Congress about the student loan debt burden.

“I’m paying my daughter’s undergraduate loans; she just finished college last year. She got married last year, too. I don’t want them to delay their lives, so I took the burden on myself. I have two sons also. One has student loans and doesn’t have a job. Other son is pre-med at Rutgers New Brunswick. They all live at home to save money.”

» READ MORE: Debt is bad for mental health. Relief from Biden’s student loan forgiveness could take time.

Alethia Mathis, a 55-year-old in East Mount Airy, carries $15,000 in federal student loans from Temple University where she was enrolled for a bachelor’s in business management after losing a prior job at a residential-treatment facility. Mathis got a job with the city and couldn’t finish the degree. But she still had the debt.

“This wipes out the debt that I’ve been paying for 16 years,” said Mathis, an administrative assistant with the city. “I’m ecstatic that it’s over.”

Mathis’ daughter, Cherelle Dessus, 28, also will benefit. Dessus earned an undergraduate degree from Millersville University in 2016 and a master’s in public administration in an online program from Pennsylvania State University in 2019. She carries about $140,000 in federal student loans.

“In college, I was a young student and it did not bother me,” Dessus said of the loans. “It became more real how serious this debt was once I got out of Millersville.”

At a nonprofit, Dessus job-coached people who were incarcerated. Now she’s employed in the city government’s Office of Diversity, Equity and Inclusion.

Based on her job history, Dessus has enrolled in Public Service Loan Forgiveness, PSLF, which cancels federal student loans for those working in lower-wage jobs in nonprofits and government, and who make monthly payments on their federal student loans for 10 years. She is three years into the program.

A part of Biden’s forgiveness plan that excites her are adjustments to the income-driven repayments in the federal student loan program that reduce monthly loan payments based on a borrower’s compensation. Under Biden’s announced plan, income-driven repayment – the monthly payments – would be capped at 5% of discretionary income instead of 10%. The new formula applies to undergraduate loans.

Federal officials cite a single construction worker making $38,000 a year with a construction management credential who would pay only $31 a month under Biden’s new rules, as compared to the $147 the construction worker now pays.

But the Department of Education is still writing the new rules. Part of Dessus’ student loan debt – for her master’s degree – would likely not fall under them, an expert said.

“I hope that rings true for real-life examples,” Dessus, who has planned an October wedding, said of the repayment changes and the possible lower monthly payments. “I am not worried about if the changes will happen,” Dessus said of Biden’s debt-forgiveness plan. “But as the transition takes place, how much of a headache will it be to make sure all the information is accurate?” she asked.

» READ MORE: Biden student loan forgiveness: Who’s eligible, what’s the income limit, and how will it work?

Judy Goss worked in Washington, D.C., in the early 2000s and was told she needed an advanced degree if she wanted to go further professionally. She went to Georgetown School of Government and took out loans, and “they told me I’d have no problem finding a job. I don’t regret my education, but I do regret the amount I paid.”

She graduated in September 2008, during the financial crisis, couldn’t find work, and moved back to South Jersey to teach as an adjunct professor.

“For me, $10,000 in relief is a drop in the bucket. I owe close to $150,000, between undergrad and grad school. I appreciate the effort. It helps a lot of people, but it barely touches the debt I owe. My graduate loans are staggering.”

Under income-driven repayment, “my interest keeps accruing. I don’t know if I’ve even touched the principal the entire time since I’ve been paying since 2009. It keeps ballooning. With the new income-driven repayment maybe I could get it forgiven after 2029.”

Her monthly payment totals $300 a month, and the total debt has prevented homeownership.

“I tried to apply for a mortgage in 2017, and I was told my debt-to-income ratio was too high,” she said, referring to a common measure used by mortgage brokers to determine credit.

She’s puzzled why critics of the Biden plan say there’s moral hazard in bailing out student debtors.

“They [the government] bailed out the banks, Ford, and other automakers, and now people squawk about bailing out average people who made under $125,000.”

David Latimer, 26, in West Berlin, wanted as little student debt as possible. He lived at home. He attended Camden Community College, paying by the semester. He earned an associate’s degree and enrolled at Rowan University, again commuting from home, and graduated in 2018 with $16,000 in federal loans.

Four years later, Latimer has paid down his federal loans to $14,000. With Biden’s plan – which he thinks will happen – he could be left with a $4,000 unpaid balance.

“My intention is to pay that off and move ahead with my life and save up for a house in the next year because I won’t have that extra payment,” Latimer said. He works in communications for a country club.