From homebuying to building savings, the student loan payment pause changed these Minnesotans’ lives

In the more than two years that student loan payments have been paused, Ben Dufault saved enough money to buy his first house.

Yasin Mohamud paid off other debts and saved for a move to his dream city.

Melissa Finnegan kept paying, knocking her student loan debt balance down $10,000.

The ongoing pause on federal student loan payments that began in March 2020 has changed some Minnesotans’ lives for the better. It’s given them room in their budgets to afford major purchases, get ahead on student loan payments and catch up on other debts. More relief could be on the way as President Joe Biden considers an executive order to cancel $10,000 in student loan debt per borrower, despite opposition from Republicans and some economists.

Nearly 800,000 people in Minnesota owe student loan debt, according to the nonprofit Student Borrower Protection Center. Some of those Minnesotans told the Star Tribune about how their lives have changed since the payment pause started.

A new home

Dufault thought he and his boyfriend would not be able to afford a home for several years. The 30-year-old, who works in Augsburg University’s admissions office, and his partner, who is a state employee, both went to graduate school and have a combined debt of about $120,000.

During the student loan pause, they each put the $200-300 per month they had been paying toward their debt into savings for a home down payment. In March 2021, the couple bought their first home together, in north Minneapolis.

“We would’ve barely been able to afford this house without the pause,” Dufault said. “It was the cost of the down payment that was always the problem.”

They expect their budget to tighten when student loan payments eventually resume. Biden’s rumored proposal of $10,000 in debt cancellation would not make much of a dent in their balance. But Dufault said he and his boyfriend are eligible for the federal Public Service Loan Forgiveness program, which would forgive any remaining debt after they have made monthly payments for 10 years.

A big decision

Leah Vogel has saved nearly $18,000 while not paying her student loans — almost enough for a down payment on a house but also enough to erase her remaining debt.

It’s a decision Vogel, 30, isn’t taking lightly. By wiping her student debt clean, she would not have to worry about the interest that accumulates monthly. But Vogel, who rents a small apartment in Minneapolis, said exhausting her savings would also bring her “back to square one” on homebuying.

If Biden cancels $10,000 in student debt per borrower, Vogel said she could possibly afford to both buy a home and pay off her debt balance.

“It really just 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 company. “It has been a constant back and forth the last six months to a year on what I should do with this.”

Pursuing his passion

For as long as he can remember, Mohamud has wanted to live in New York City. But the more than $40,000 he owes for his undergraduate education had previously held him back from moving there.

With student loan payments frozen, the 34-year-old Edina resident has built his savings up and paid off his car and some other debts. Mohamud, who emigrated from Somalia to Minnesota with his family when he was a child, said he can now envision a life in America’s largest city.

A legal writer at Thomson Reuters who freelances for other media outlets in his spare time, Mohamud hopes to move to New York City soon and write for big-city publications.

“I’ve always wanted to work for magazines,” Mohamud said. “My dream is GQ.”

Long Awaited Progress

Finnegan never stopped making her monthly student loan payment. With interest rates locked at 0%, she said she made nearly $10,000 of headway over the past two years, lowering her remaining student loan debt balance to about $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 regularly made payments before the pause, yet it took her nine years to lower her principal balance to $37,000 due to accruing interest.

“It felt like the debt amount never moved or just moved very, very slowly,” said Finnegan, a government relations specialist for Ramsey County. “Finally, I can see the debt amount coming down.”

Finnegan hopes Biden will consider erasing all student loan debt. She said she and her husband would prefer to put that money toward childcare for their three children, which costs them roughly $2,600 per month.

‘Our American Dream’

Oballa Oballa said he was able to achieve his “American dream” because of the federal payment pause.

Born in Ethiopia and raised in a refugee camp in Kenya, Oballa put the money he saved over the past two years toward building a house for his family in Austin, Minn. He, his fiancé and his two kids, ages 5 months and almost 2 years old, 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, also was able to pay off a private student loan during this time.

“My family and I were relieved to just get that pause,” said Oballa, who graduated from the College of St. Scholastica in 2021 with a bachelor’s degree in social work and has about $25,000 in student loan debt. “Now, we have our American dream that we’ve built from the ground [up]†

Saving for law school

Anisa Omar graduated from Minnesota State University, Mankato, several months after student loan payments were frozen and has not had to make a single payment toward her $21,000 debt balance.

Omar, a 23-year-old elementary school behavioral specialist from Hopkins, said the break has helped her pay bills and save for law school. She will attend the University of St. Thomas this fall and her loan payments should defer until she finishes law school there.

Still, Omar said she is daunted by how much her debt balance may grow during law school. She hopes Biden will consider canceling more than $10,000 in student debt.

“I would go for canceling all student debt,” Omar said. “We should want the best for all individuals.”

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