Columbus man's monthly payment increases 500% in federal freeze confusion
COLUMBUS, Ohio (WCMH) — Hearing of federal funding freezes, Tyler Perry checked his student loan plan and found a "terrifying" $800 increase.
”I had a panic attack. It seems like a natural reaction," Perry said. "The American Dream is shut out and you are stuck paying exuberant loans.”
Perry was on an income-driven student loan repayment plan that was frozen on Feb. 18, citing a federal court injunction that ruled against the Biden administration's Saving on a Valuable Education (SAVE) Plan. Perry did not receive word his $209 monthly payment was now $991, and only discovered the change when he went into his loan service provider to look at his account in mid-March.
Income-driven repayment plans like Perry's base student loan payments on borrowers' income and family size. The Federal Student Aid office offers four income-driven repayment plans: SAVE, Pay As You Earn, Income-Based Repayment and Income-Contingent Repayment. The injunction only ruled on the SAVE plan, but all four were paused.
Perry, a music therapist in Columbus, said he could not have afforded the increase. On March 26, the Department of Education reopened the income-driven payment plans, putting Perry's payments back into place. Although he was no longer responsible for a $1,000 monthly payment, he said the experience made him worry things could change again.
“I don’t even know how to express how chaotic this has been," Perry said. “I don’t know how the average American can afford a payment like that and groceries.”
Perry said his story was not unique. According to the Institute for College Access and Success, there are more than 13 million borrowers on an IDR plan in the U.S., and Ohio ranks ninth in the U.S. for the most student debt owed. According to the Department of Education, student loans average $38,000 per borrower.
On March 18, shortly before the freeze was mostly undone, the American Federation of Teachers sued the Department of Education over the pauses. The 1.8 million-member teachers' union said freezing student loans violated federal law by blocking access to affordable loan payments.
The Federal Student Aid office said anyone who was on the SAVE plan is in general forbearance until the court reaches a decision or the government is able to accurately calculate monthly payments. Under this designation, borrowers do not owe payments or accrue interest, and time spent does not offer any credits toward their loans.
Perry voiced frustration with the federal government for the "reckless and poorly communicated" situation. He said he doesn't feel like he can trust that another situation won't arise.
“Fear for an entire week not knowing the outcome of the next ten years. It was terrifying,” Perry said. “It’s impossible to move forward in life.”