The temporary pause on requirements for federal student loan payments that started due to the health and economic crisis is scheduled to end on September 30, 2021. Student loan debt can be crushing, and this pause has been a huge relief for many Americans. In 2020, for the first time in the United States’ history, the amount of student debt surpassed $1.7 trillion — this represents a 100% increase from just 10 years prior. The amount of student debt continues to climb, and Americans are struggling to pay back this debt.
One person helped by student loan forbearance is 46-year-old Laura Bembry, whose original student loans came to $80,000 when she graduated in 2003. She has paid more than $60,000 on her original loan of $80,000, but because of high interest rates, she will end up paying a total of $127,000 at her current rate of repayment — which will mean she’ll pay more than $40,000 worth of interest when her loan repayment is complete.
Bembry said that the impact of the pause on student loan payments on her life has been tremendous. For the first time, she has been able to put away a little bit of money in savings for emergencies, a practice that she said will need to stop when forbearance ends this September.
Who Will Be Most Impacted by Ending Student Loan Forbearance?
As we near October, when the federal student loan payments will need to begin again, it’s important to understand what that means for students and graduates across the country. As Robert F. Smith has pointed out, the student loan crisis disproportionately impacts African American students — who typically must take on double the average college debt of their white counterparts. This debt can leave a lasting impact on graduates, and can delay investments such as home ownership, starting a small business or accumulating generational wealth.
One program working to reduce the racial debt disparity is Student Freedom Initiative, a non-profit program conceptualized by Smith to provide alternative financing options and more for students of color. The initiative was founded in 2020 by Smith and the Fund II Foundation, of which he is founding director and President, and debuts at an inaugural group of nine schools for the 2021-2022 academic year. Student Freedom Initiative contains an income-contingent loan alternative that aims to ease the burden of student loan debt for STEM majors at historically Black colleges and universities (HBCUs).
The initiative also provides all students at participating schools resources including tutoring and mentoring, paid internships and technology-based targeted capacity building programs. These student services, coupled with graduating school with a more manageable amount of debt, will help set students up for success, so they can unlock their full potential.
Student loan debt is a problem, and it disproportionately impacts students of color. To learn more about what Robert F. Smith is doing to help expand access to higher education.