Early in 2020, we covered off on the student loan market and its connection to renting apartments. Obviously that's a pretty massive topic, as your amount of loans due + interest rates (low-ish now) + monthly payment + employment status + any forebearance or deferrment determines a lot about your monthly income, and that translates to where it would be logical to rent or buy.
Now we have a seeming victory in the Presidential election for Joe Biden. What does that mean for student loans going forward?
There is a belief that Biden will sign an executive order writing off $50,000 of student loan debt per debt holder, but with the baseline being about $10,000 per loan holder. The $50K figure was initially tied to Elizabeth Warren when she campaigned, and Bernie Sanders argued for eradciating it all. HousingWire has actually argued for a more-modest $17,000 per debt holder, noting this chart:
Forgiving $10,000 per loan holder would slash the country’s $1.6 trillion outstanding student loan tab by about a third, according to calculations by higher-education expert Mark Kantrowitz.
$125,000/year in income
If you attended a 2- or 4-year public college or university and make less than $125,000/year, there is a chance at complete student loan forgiveness. There also might be changes to income-driven repayment plans. As Forbes notes:
Currently, there are four income-driven repayment plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE) and Income-Contingent Repayment (ICR). These plans require 10-20% of your discretionary income. Biden would limit student loan repayment for federal student loans to no more than 5% of discretionary income. Moreover, enrollment in income-driven repayment plans would become automatic, whereas currently you have to enroll. Student loan forgiveness also would become automatic after 20 years, and you would not owe income tax on the amount forgiven.
Is student loan relief a bipartisan issue?
It actually might be. Somewhere around 58% of registered voters approve of the measure. The exact amounts and policies vary, obviously, and there are concerns around personal accountability, investing in yourself, graduate loans vs. undergraduate loans (most of these discussions right now are about undergraduate loans), and politically, the issue is around a split Congress, as Republicans generally tend to oppose these plans, or at least limit them.
Interestingly on the political side, as pointed out by MarketWatch:
"Though the plans for free public college would require new laws, Sens. Chuck Schumer and Elizabeth Warren have said the president can cancel debt by himself. Some education law experts say the same. Lawyers at Harvard Law School’s project on Predatory Student Lending have previously said the president’s Secretary of Education has “specific and unrestricted authority to create and to cancel or modify debt owed under federal student loan programs in the Higher Education Act (HEA) itself.”
If you go back to that chart/graphic above, you can see that 28.1 million Americans are somewhere under a $25,000 remaining balance on loans. If you could get a $10,000 wipe-out, you might eradicate 15M people from student loan debt and put another 13.1M people close to ending it. Since your most-crucial expense is often housing (or 1 and 1A with "food"), it might allow some people to rent in a new area.
The current average student loan payment is $393 per month. If that disappears and you put even 1/2 of it into housing, that means you could rent a place that's $195 more expensive per month. That's a jump between, say, $1,000/month and $1,195 per month.
Now add in discounts through services like ours, which can save you up to $335/month.
You can potentially afford something $400-$500/month using the right mix of partners and seeing student loan foregiveness up to $10,000.
It's a big issue in terms of renting, as a result.
Holler at us with any questions.