From buying a house to building savings, the student loan payment break has changed the lives of these Minnesotans
In more than two years since student loan repayments were halted, Ben Dufault has saved enough money to buy his first home.
Yasin Mohamud has paid off other debts and saved up to move to his dream city.
Melissa Finnegan continued to pay, bringing down her student loan balance by $10,000.
The ongoing pause in federal student loan payments that began in March 2020 has changed the lives of some Minnesotans for the better. This gives them room in their budget to make big purchases, speed up student loan repayments, and catch up on other debt. More relief could be on the way as President Joe Biden considers an executive order to forgive $10,000 in student loan debt per borrower, despite opposition from Republicans and some economists.
Nearly 800,000 people in Minnesota have student loan debt, according to the nonprofit Student Borrower Protection Center. Some of those Minnesotans have told the Star Tribune how their lives have changed since the payment break began.
A new house
Dufault thought he and his boyfriend wouldn’t be able to afford a house for several years. The 30-year-old, who works in the admissions office at the University of Augsburg, and his partner, who is a state employee, have both completed higher education and have a combined debt of around 120 000 dollars.
During the student loan break, they each put the $200-300 a month they had paid for their debt into savings for a down payment on the house. In March 2021, the couple purchased their first home together, in North Minneapolis.
“We could hardly have afforded this house without the break,” Dufault said. “It was the down payment cost that was always the problem.”
They expect their budget to tighten when student loan repayments resume. Biden’s supposed $10,000 debt forgiveness proposal wouldn’t hurt their balance much. But Dufault said he and his boyfriend are eligible for the federal Civil Service Loan Forgiveness Program, which would forgive any remaining debt after making monthly payments for 10 years.
A big decision
Leah Vogel has saved nearly $18,000 while not paying off her student loans — almost enough for a down payment on a house, but also enough to clear her remaining debt.
It’s a decision Vogel, 30, doesn’t take lightly. By erasing her student debt, she would no longer have to worry about interest accumulating each month. But Vogel, who rents a small apartment in Minneapolis, said the depletion of her savings will also put her “back to square one” on buying a home.
If Biden forgives $10,000 in student debt per borrower, Vogel said she could eventually afford to both buy a house and pay off her debt balance.
“It really totally changes the equation,” said Vogel, who graduated from the University of Minnesota in 2014 with an art degree and works as a project manager at a local financial services firm. “It’s been a constant back and forth over the last six months to a year about what I should do with this.”
Pursue his passion
For as long as he can remember, Mohamud has wanted to live in New York. But the more than $40,000 he owes for his undergraduate studies had previously prevented him from moving there.
With student loan repayments frozen, the 34-year-old Edina resident has been building up his savings and paying off his car and other debts. Mohamud, who emigrated from Somalia to Minnesota with his family as a child, said he can now look forward to life in the largest city in the United States.
A legal writer at Thomson Reuters who freelances for other media in his spare time, Mohamud hopes to move to New York soon and write for major city publications.
“I always wanted to work for magazines,” Mohamud said. “My dream is GQ.”
Finnegan never stopped paying his student loan monthly. With interest rates stuck at 0%, she said she’s made nearly $10,000 in progress over the past two years, bringing her remaining student debt balance down to around $27,000.
The 40-year-old St. Paul resident graduated from the University of Minnesota in 2011 with a master’s degree in public policy and about $48,000 in debt. She was making regular payments before the break, but it took her nine years to reduce her principal balance to $37,000 due to accrued interest.
“It was like the amount of debt never moved or just moved very, very slowly,” said Finnegan, government relations specialist for Ramsey County. “Finally, I can see the amount of debt going down.”
Finnegan hopes Biden will consider wiping out all student loan debt. She said she and her husband would rather spend the money on childcare for their three children, which costs them around $2,600 a month.
“Our American Dream”
Oballa Oballa said he was able to realize his “American dream” thanks to the suspension of federal payments.
Born in Ethiopia and raised in a refugee camp in Kenya, Oballa used the money he saved over the past two years to build a house for his family in Austin, Minn. He, his fiancé and two children, aged 5 months and almost 2 years, moved into the new house last month.
Oballa, a 29-year-old supervisor at Hormel Foods who is seeking re-election to the Austin City Council, was also able to pay off a private student loan during this time.
“My family and I were relieved to have this break,” said Oballa, a 2021 College of St. Scholastica graduate with a bachelor’s degree in social work and who has about $25,000 in student loan debt. “Now we have our American dream that we built from the ground up [up].”
Saving for law school
Anisa Omar graduated from Minnesota State University, Mankato several months after student loan repayments were frozen and hasn’t had to make a single payment on her $21,000 debt balance.
Omar, a 23-year-old behavioral specialist from Hopkins Elementary School, said the break helped her pay her bills and save for law school. She will be attending the University of St. Thomas this fall and her loan repayments are expected to be deferred until she completes law school there.
Still, Omar said she was discouraged by her growing debt balance while in law school. She hopes Biden will consider canceling more than $10,000 in student debt.
“I would go for the cancellation of all student debt,” Omar said. “We should want the best for all individuals.”