Biden’s student loan ‘on-ramp’ allows borrowers to miss payments for a year

LINCOLN, Neb. (KLKN) – Earlier this year, the Supreme Court shut down President Joe Biden’s student loan forgiveness plan, saying he needed Congress’ approval for such a costly program.

And with the pandemic payment pause ending after three years, borrowers will have to start making payments next month.

Interest on those payments already started accruing on Sept. 1.

But under Biden’s “on-ramp” plan, federal student loan borrowers won’t be punished for missing monthly payments.

The plan will run from Oct. 1 to Sept 30, 2024, and interest will still accrue during that time.

Ernie Goss, an economics professor at Creighton University, said these kinds of benefits might be nice for borrowers but ultimately affect other taxpayers.

“If you’re a person who is a retail clerk that has a high school diploma,” he said, “you’re wondering, ‘Why am I helping pay off these individuals whose long-term income is substantially higher than mine?’ Is this really fair?”

The average loan payment per month is about $390, according to the Federal Reserve.

Normally when a loan isn’t paid, the National Credit Bureaus are notified, and your credit score can suffer.

But with the “on-ramp” plan, missed payments won’t result in a default, nor will they be reported.

“If you tell me that I don’t have to repay a loan, and there are no penalties to it, why would I begin repaying it until next year?” Goss said. “That’s a good deal, if that interest rate is competitive.”

He said all these changes to how student loans work really just create confusion.

“It undermines and politicizes the whole process,” Goss said. “What the president needs to do is step back and let the current plan proceed. On October 1st, students should begin to repay those loans.”

He said the root of the problem is rising tuition rates and students not understanding what higher education really costs.

“You could say, ‘Well, you borrowed it; you pay it back. Simple as that,'” he said. “But it’s not quite that simple. We in the universities, colleges, post-secondary education – we’ve been part of the problem as well.”

Goss believes students, parents and taxpayers all need to demand that schools be more transparent about costs and provide more affordable options in the first place.