Before the pandemic, when Junie Celestin, student loan counselor at Urban Edge, saw clients with loan debt, she was helping them get out of default. During the pandemic, with a moratorium on student loan interest and payments, the questions she's getting have changed. "Now I'm talking to clients about home down payments," she says. "And I'm trying to help them figure out what to do when the moratorium ends."
Celestin, who also serves the community with foreclosure prevention and credit counseling, says many of her clients have found the moratorium, recently extended beyond September to January 31, 2022, to be helpful. People trying to purchase their first home are able to save more money for the down payment, she shares. "And that means they can purchase their first home sooner."
Others have time to figure out how to avoid financial crisis. One client who took out loans for her children's college education has payments amounting to $1,600 a month. But she's on social security and her own income amounts to about $1,900 a month. "We're working on it," Celestin says. "Because of the moratorium, she has a little more time to determine what her best student loan repayment options are so she is prepared in advance."
Dealing with debt
About 42.9 million Americans have debt from federal student loans, according to the U.S. Department of Education. For bachelor's degrees, the average is just under $30,000. For graduate degrees, the debt rises to an average of $71,000.
"During COVID-19, we've been in a complex financial landscape with job changes, stimulus payments, eviction and student loan moratoria all coming together very quickly," says Molly Barackman-Eder, director of financial capability for NeighborWorks. "In this dynamic environment, a financial coach can help people chart a course that makes sense for their individual goals and unique situations. A financial coach helps people refine their goals, understand their options, and make a plan to achieve their dreams, even when the menu of options is changing rapidly."
Celestin sees more than 80 clients a year about student loan debt. Most of them want to buy their first home and those loans are delaying the process. "Without realizing, they took out too much in student loans," Celestin explains. "They may the first person in the family to go to college. They think, 'whatever it costs.' Sometimes the sum of those student loans throughout the student's four years in college are too expensive to afford. Sometimes the student and their families are not conscious of it until the six month grace period ends."
Celestin says some clients have as much as $200,000 in student loan debt. The jobs they find after graduation aren't enough to pay that off. "They have high balances, but they may earn $40,000 a year. Because of this, many students continue living with or go back to live with their parents after graduation"
But there is hope. Student loan borrowers can opt for a lower monthly payment with the company currently servicing their student loans, and/or apply for the public service loan forgiveness program, and more. In June 2021, the Federal Housing Administration announced they are updating their student loan monthly payment calculations "to take steps to remove barriers and provide more access to affordable single family FHA-insured mortgage financing for creditworthy individuals with student loan debt."
What will happen when the forbearance ends this spring? Urban Edge and organizations like it will continue to help people navigate financial hurdles. "We love the people we serve; the community," Celestin says. "We have a great team at Urban Edge and we are determined to help everyone that reaches out to us."
Getting a break in Texas
In Texas, Jaime Ayala is also seeing changes for his clients. "For our students, the main takeaway is that they're being given the opportunity to redirect their funds for other debts," says Ayala, student success coordinator with Foundation Communities. "The student loan moratorium helps students who have already graduated. But we also have a lot of students who have associate's degrees and want to go back to school. They're trying to figure out how to pay for it." With the moratorium, he expects some of those students to be able to pay tuition toward their bachelors while they're getting relief from paying back loans on their associate's degrees.
"It's opening opportunities for students to go back to school without having to take out more loans," he says. "They can work on a certificate program or a leadership certificate or a teaching certificate." Others are just trying to pay rent.
Foundation Communities' College Hub program works with 500 to 1,200 students a year, helping them get through the barriers that might block their way to a higher education. That includes filling out forms and figuring out how to pay for college. "We look at student loans as a tool to help pay for education," Ayala explains, but the organization tries to help students find other ways to finance school, to graduate debt-free if possible. "But if a student borrows too much, it ends up being a heavy burden to deal with. For some careers, the entry-level pay is not enough to pay off loans."
The student loan moratorium is providing some help, he says. "Their debt isn't growing; it's frozen, and that allows the student not to worry as much." While it's temporary, he says, the moratorium is giving graduates breathing room, letting them cover expenses like childcare and phone bills, which will give them a leg up before the loan payments begin again.
10/26/2021
