With Biden’s plan to help relieve student loan debt, many people will be able to significantly boost their credit scores.
DES MOINES, Iowa — On Wednesday, President Joe Biden announced his student debt relief plan, which is expected to help millions of borrowers across the country.
When borrowers examine their credit score, student loans have a huge impact.
With Biden’s plan to help relieve student loan debt for those earning less than $125,000 a year, many people will be able to significantly boost their credit ratings, making them eligible for loans they might have been able to get. been refused in the past.
“For people who are eligible and who are going to qualify, then I think it’s time for them to take a step back and think, okay, what can I do with this little break and how am I going to do big changes in my life,” said Mike Hammen, Certified Financial Planner at Vision Financial Services.
Hammen said eliminating student debt will have a huge impact for millions of people in many ways.
“If you eliminate $10,000 in student loan debt, in many cases it makes people who maybe weren’t eligible in the first place, maybe are now,” Hammen said. “Or if they were eligible, that also impacts the rate, the lending rate.”
Future Drake University graduate Brian Orellana celebrates Biden news.
“I’m doing really well because it means I’m debt free,” Orellana said.
He said finances were constantly on his mind as his family relied on his success.
“Being a first-generation college student is really complicated because finances are a priority for me,” Orellana said. “I have to think about it every day.”
According to EducationData.org, more than 433,000 Iowans have student loan debt, with the average borrower having more than $30,000 in loans. That means a total of $13 billion in student loan debt belongs to Iowans.
Hammen said people like Orellana are in an ideal position to take funds they would have spent on their student loans and invest in other necessities.
“For people who have copies for retirement plans, if you’ve paid off $200 to $250 a month in college debt and you don’t have to pay it anymore, then actually that can go to a 401 000,” Hamman says.
Hammen thinks the worst thing you can do is use the excess money you would have invested in your loans for travel and other material goods, because he said that help may never come back.
While canceling student debt is a monumental step, some hope it means more changes are on the horizon.
“I hope it will [college] a little bit more accessible to people, at least makes it less expensive or at least less worrying for individuals to go to college or be afraid of going to college,” said David Merchant, a student at Drake.