More than 40 million Americans have student loan debt, and outstanding student loans nationwide total more than $1.5 trillion. Soon, the government’s pause on federal student loan payments will expire, leaving millions of borrowers grappling with how they’ll pay what they owe in 2021.
But Brandon Leake, a 28-year-old husband and father, figured out a winning way to wipe out his college debt this fall. He is the first spoken-word poet to land in the top spot on the NBC show “America’s Got Talent” — and win its top prize of $1 million.
“The moment that I finally get my winnings, my plan is to pay off my student loan debt,” Leake said.
The show says the prize is “payable as a financial annuity over 40 years, or the contestant may choose to receive present cash value of such annuity.” Leake said he’s opting to take the lump-sum payment.
He said he’s often been reminded how much he owes.
“I would get reached out to all the time,” Leake said. “‘Hey, you know you owe $30,000-plus to the government regarding that student loan that you took out — when’s that money coming back to us?'”
Leake said those calls stopped this spring. Like most borrowers, Leake has not paid his federal student loan bills since then.
“There’s been a pause on all student loan payments that have had to be made, which has been a huge blessing, I know, for not just myself but a plethora of other people,” he said.
In March, the Department of Education suspended federal student loan debt payments, paused accruing interest and stopped collections on defaulted federal loans as part of the federal CARES Act. In August, President Donald Trump signed an executive order that extended the relief through the end of the year. That pause on payments, due to the Covid-19 crisis, is now scheduled to end on Dec. 31.
More from Invest in You:
Students say minimum wage hike to $15 an hour would be game changer
Woman works 5 jobs to stay afloat after being laid off. It’s still not enough
37 million student loan borrowers will have to resume payments in January
Leake worked as an academic advisor at a local community college in his hometown of Stockton, California, before his big win. He said he has former students and some friends who have $50,000 to $100,000 or more in student loan debt and don’t know how they will afford their payments next year.
“There used to be a time in which going to college would assure you a secure position of work in which you would be able to financially be able to pay them off within the course of 15 to 20 years,” Leake said. “That’s not the case, that’s not the economics we live in anymore.”
Adam Minsky, a Boston-based attorney specializing in student loan law, agrees.
“Between job loss and furloughs and reductions in income … related to the pandemic and the recession, there is deep concern that people will not be able to afford their normal monthly payments,” he said.
There could be action in the next several weeks to provide relief to borrowers. President Trump could extend the pause before his term ends. Or, President-elect Joe Biden may forgive some federal student loan debt when he takes office. Experts say borrowers shouldn’t count on that. Instead, they should get ready for 2021.
“Find out what type of loans you have and what options you’ve got when payments become due in January and start working on a plan now — don’t wait,” Minsky said. “By the time that bill arrives, there’s going to be literally tens of millions of borrowers who are going to be trying to figure out what to do.”
Borrowers already have a couple of options for payment relief on federal student loans. Switching to another repayment plan — an income-driven one — will lower monthly payments by increasing the time it takes to pay off the full loan balance. For those who are out of work and don’t qualify for a zero payment on that plan, applying for unemployment deferment on student loans is another option, Minsky said. And, with interest rates at historic lows, it may be a good time to consider refinancing private loans, especially if you have a good credit score.
Leake was on an income-driven repayment plan, but even before the pandemic, he said he often found it difficult to make payments. While he supports federal student loan forgiveness, he’s “not counting on that to come to fruition,” he said.
Instead, the spoken word artist decided to literally put his words into action. “I’m trying to make the wisest decisions right now,” said Leake, who is now concentrating full-time on his career in the arts. His first financial move will be that use of his winnings from “America’s Got Talent” to wipe out what he owes.
Unfortunately, most student loan borrowers cannot depend on that kind of windfall.
SIGN UP: Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox.
CHECK OUT: I have 9 side hustles and bring in up to $4,000 each month: Here’s my best advice via Grow with Acorns+CNBC.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
