With a degree in economics, Olivia Barr is a keen observer of finances — especially her own.
She graduated from the University of Denver two years ago with $15,000 in student loans. Payments have been paused during the pandemic, but that break was soon to expire.
"I needed to know if I was going to be on the hook for $800 a month," the Minneapolis resident said. So, when Barr heard the news Wednesday about President Joe Biden's executive action forgiving $10,000 of federal student loan debt and extending the payment pause through Dec. 31, she was ecstatic.
"It's literally life-changing," said Barr, who works in health care data analysis. "That really changes how I can plan for the future."
Biden's student debt plan offers up to $10,000 in debt cancellation for borrowers who earn less than $125,000 annually as an individual or $250,000 as a married couple. Those who received a Pell Grant in college — a key financial aid source for low-income students — may receive up to $20,000 in debt relief, according to the U.S. Department of Education.
The relief will be widespread in Minnesota if Biden's plan survives legal challenges, which are expected. A few hundred thousand students attend college each year in Minnesota, which is home to two sprawling public college systems and more than two dozen private colleges.
Some 63% of people graduating from Minnesota schools with a bachelor's degree in 2021 had loans, with a median debt of just under $24,000. For those getting associate degrees from Minnesota schools, 52% graduated with loans, carrying a median debt of just over $15,000.
Mari Sitner, who graduated in 2021 from Emerson College in Boston, received a Pell Grant and left school with about $17,000 in debt. The program will wipe out her debt, a blessing for Sitner, who is working as a barista in Uptown Minneapolis and managing a fledgling theater company she founded, Bad Mouth Theatre Co. of St. Paul.
News of the student debt plan has been enthusiastically received among young graduates.
"I've talked to friends and they're all very excited," Sitner said.
Some grads are hoping that more debt relief's in the future. Tiffany Onyejiaka, a first-year medical student at the University of Minnesota, graduated debt-free from Johns Hopkins University but took out loans for a master's degree. With average medical school debt running at $200,000 or more, she's looking at a lot of loans ahead.
"I think it's pretty great that it's happening," she said. "I hope that it's the beginning."
University of Minnesota President Joan Gabel said in a statement the student debt decision was "great news" and "lines up with the university's work," noting the U's new tuition-free programs for enrolled tribal members and students whose families make less than $50,000 annually.
U spokesman Jake Ricker could not say how many current and former university students will be affected by the federal debt relief. Administrators are trying to figure out if higher education institutions or the federal government will be charged with instructing students on initiating the debt relief process.
"It's too early to say exactly what those mechanisms will look like," Ricker said.
Mike Uran, director of financial aid at St. Cloud State University, said he was inundated Wednesday with calls from former students about the loan forgiveness plan. His best advice for them, he said, is to just make sure their contact information is up to date with their loan servicer.
"Unfortunately, at this moment, what we tell them is [to] just stay tuned," he said. "We don't have any information other than what's been released to the media from the Biden administration. There haven't been any other types of communications to financial aid offices prior to today."
His office has been inundated with questions from current students as well.
"We are in our first week of classes for fall semester, and we have students coming in who now want to know, 'Should I take out my loan today for this fall in order to get it forgiven?' " (Loans must have been originated before July 1 to qualify.)
The U.S. Department of Education is also proposing to overhaul limits on how much students must pay each month, Biden announced. Borrowers would have to pay 5% of their monthly discretionary income instead of the currently required 10% under income-driven repayment plans.
For borrowers with original debts of $12,000 or less, loan balances would be forgiven after 10 years of payments instead of the current 20-year threshold. And the Education Department would fully cover the monthly interest of borrowers who regularly make required payments, helping them chip away at their core balance faster.
Mike Dean, executive director of the community college student association LeadMN, said the proposal to cover borrowers' student loan interest will aid current and future college graduates. Borrowers with large amounts of debt often report their core balances have hardly budged after they have paid thousands of dollars because of compounding interest.
"I'm hearing stories from students that they've been making their monthly payments, but their debt continues to grow. To me, that is the most harming to students," Dean said.
To permanently address the issue of student loan debt in Minnesota, Dean said state lawmakers will need to hold colleges here accountable for tuition hikes. If they don't, future students will continue to carry large amounts of debt.
Minnesota Office of Higher Education Commissioner Dennis Olson said he expects the college affordability discussion to now shift toward more systemic solutions, such as lowering tuition.
"This is absolutely an integral part of the conversation," Olson said. "Anything we can do to address larger policy shifts will only make the impact of this particular announcement go that much further."
The impact is already being felt by students such as Leah Payne of Duluth, who graduated from Colorado State University with a graduate degree in music therapy and $40,000 in federal student loans. Payne, 27, said she's been keeping a close eye on Biden's loan forgiveness plan. Wednesday's news means she and her new husband can consider saving to buy a house or another car.
"You know what you're signing up for, but we're both in fields where we don't make money," she said. "We might not have to struggle."
Peter Larson of St. Paul laughed when asked if he had student debt.
"I've got $400 left," said Larson, a 2012 University of Minnesota graduate who now manages a medical research lab at the U. "I want Biden to help me out!"
Kidding aside, Larson doesn't resent the loan forgiveness, even though he's paid his own loans back.
"We're trying to advance society here," he said.
Staff writers Christa Lawler and Jenny Berg contributed to this report.
