LIHU‘E — As a 19-year-old first-generation college student and young mother, completing her degree was the number one priority for Kalei Carvalho.
In order to cover the steep price of college tuition, Carvalho borrowed as much as she could — without fully understanding how that would affect her after she graduated.
“I was naive in understanding how student loans can affect someone,” said Carvalho, who years later, now works at Kaua‘i Community College.
While student loans allowed Carvalho and her husband, a disabled military veteran, to afford the supplies and tuition during college, the accumulated debt has weighed on her since graduation.
Though an income-driven repayment plan dropped her monthly payments significantly, covering basic necessities alongside loans has remained a constant battle. Struggling to afford the cost of housing, the family went homeless several times.
“Kaua‘i has been home to my ‘ohana for hundreds of years,” she said. “Having debt made me feel as if I would have to move my ‘ohana elsewhere just to make ends meet.”
Carvalho is one of 121,700 borrowers in Hawai‘i saddled with a combined $4.6 billion in federal student loans, according to the U.S. Department of Education.
That burden will soon become lighter, as President Joe Biden officially kicked off the application for the student loan debt cancellation process on Monday.
Biden’s plan calls for $10,000 in federal student debt cancellation for those with incomes below $125,000 a year, or households that make less than $250,000 a year. Those who received federal Pell Grants to attend college are eligible for an additional $10,000. The plan makes 20 million eligible to get their federal student debt erased entirely.
“It means more than 8 million Americans are — starting this week — on their way to receiving life-changing relief,” Biden said Monday. The president called his program a “game-changer” for millions of Americans saddled with student loan debt.
Though significant, the plan falls short of Biden’s campaign promise to forgive “all undergraduate
tuition-related federal student debt from two- and four-year public colleges and universities for debt-holders earning up to $125,000.”
In late September, the Biden administration made an unexpected change which further limited the scope of the program, excluding roughly 800,000 borrowers from relief and reducing the amount of relief many borrowers would receive.
The procedural changes exclude Federal Family Education Loans, which are issued and managed by private banks but guaranteed by the federal government.
The application is simple, taking about five minutes to complete. It does not require the submission of any tax forms.
Creating and processing the form is estimated to cost nearly $100 million, a figure that upset advocates who view the application as an unnecessary barrier
The form is meant to help exclude the roughly 5 percent of borrowers who exceed the income limits, but advocates say it could also deter some lower-income Americans who need the relief.
Most criticism of the plan has come from the right however, with six Republican states filing lawsuits to block the plan.
They argue that the decision oversteps Biden’s authority and will lead to financial losses for student loan servicers, which are hired to manage federal student loans and earn revenue on the interest.
Once the Education Department begins processing applications, borrowers should expect to see their debt forgiven in four to six weeks, officials say. Most applications submitted by mid-November will be processed by Jan. 1, 2023 — the day federal student loan payments are set to resume after being paused during the pandemic.
That student debt pause during the COVID-19 pandemic has been huge for Carvalho’s family who have gotten a moment of respite from student loan payments.
“I felt like I could breathe again financially,” said Carvalho. “We were able to pay down our credit card debt and purchase a home on Kaua‘i — something we thought would never happen.”
Though the $10,000 reduction makes up a relatively small percentage of the family’s total debt, Carvalho said she felt grateful for the decision.
“Looking at how much we owe in student loans makes me feel like we can never get ahead no matter how hard we work,” said Carvalho. “So whether they eliminate our student loans or reduce them, we are forever grateful to see the amount we owe decrease.”
Tens of millions eligible for potential relief can visit studentaid.gov and touted the application form that the president said would take less than five minutes to complete. Borrowers will be able to submit applications through the end of 2023.
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The Associated Press contributed to this report.
