The demands of a broad student loan forgiveness plan are mounting. Progressive leaders and democrats are also pressing the President to expand loan forgiveness. Although the President announced more forgiveness for certain groups several months ago, the demands call for increased forgiveness that should cover the majority of students rather than specific ones.
Understanding Loans and Forgiveness
The two primary types of student loans are federal student loans and private student loans. Federal loans are guaranteed and subsidized by the federal government. On the other hand, private loans are not backed by the government and have much higher interest rates. Because of their hefty costs and severe restrictions, private loans should only be used as a last choice. When federal loans, for example, do not cover all of your college expenses. No forgiveness plans are available for private loans.
The cancellation of a loan as part of a federal forgiveness program is known as student loan forgiveness. Once approved, these plans cancel remaining loan payments, leaving the student debt-free. The most typical is for people who work in a specific field, such as doctors or lawyers. One such program is the Public Service Loan Forgiveness (PSLF). It is now being expanded to cover a wider range of students and also cater to those previously rejected by it. We will discuss this expansion initiative below as well.
Student Loan Recent Announcements
A few months since Biden announced forgiveness for certain groups, the Department of Education has started sending out emails to students notifying them of their payments being waived off and broad forgiveness plans. Several encouraging statements have been given by Secretary Education, Miguel Cardona.
The Biden administration said that it will make significant modifications to Public Service Debt Forgiveness (PSLF), which is suffering from issues and red tapes such as cumbersome eligibility rules and low acceptances. To qualify for loan forgiveness, the program has originally needed 120 payments made on a loan. However, payments are denied due to several issues.
The Biden administration will ease the vague and cumbersome program requirements, including the 120 payments stipulation, that had limited PSLF relief to only certain types of federal student loans and certain groups of loan repayment programs through the new “Limited PSLF Waiver” initiative, which will remain active until October 2022. The Department stipulates that over 600,000 student loan borrowers will come under student loan forgiveness as a result of expanding eligibility to include more federal student loans.
Political groups, lobbyists as well as democrats and republicans are demanding up to $50,000 in cancellation or forgiveness in federally held college debt per borrower. This would wipe out all federal student debt for nearly 80% of students that making up the whopping amount of about $1.5 trillion in total student debt in the US.
While Biden has responded that he will not implement loan forgiveness expansion by presidential action, he has hinted that a debt forgiveness plan with income limits could be considered. He has previously claimed that he will accept forgiving up to $10,000 per borrower, which covers about 40% of student loan holders.
Biden’s Student Loan Forgiveness Program
Before the loan forgiveness expansion was given out and more being discussed, President Biden announced forgiveness of loans worth roughly $10 Billion months ago and has been implemented to a great extent. This program covers four types of student borrowers:
$1.1 billion student loans canceled through borrower defense to repayment
$5.8 billion of student loans for borrowers with a permanent disability,
$1.5 billion for the borrower defense to repayment process, and
$1.3 billion in cancellation for student loan borrowers in March
The terms, forgiveness or cancellation are used interchangeably and essentially have no difference in meaning or context. However, discharge is mentioned mostly when there is death or a permanent disability of the student. In essence, all these terms mean forgiveness, the cancellation of a loan as a relief for the student.
As part of the Biden forgiveness plan proposal, $10 billion in student debt has been canceled. Monthly loan payments have also been halted until January 2022. This means you won’t have to pay anything till then and will be able to save money.
However, when compared to the total $1.7 trillion in student debt in the United States, the $10 billion figure is insignificant. So yet, only 1% of all student loan holders are covered by the recent forgiveness announcement. So, after the notification, do not cease making payments or presume that your loan has been forgiven. Before making any decisions, double-check that your debt is covered by the plan.
In addition to deferred payments, forgiveness for disabled people and those who have fallen behind on their payments is also an option.
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Already Available Student Loan Forgiveness Plans
For different groups of students, there are currently a variety of student loan forgiveness plans. These are the following:
Student loan forgiveness programs run by the federal government, mostly for teachers (Teacher Loan Forgiveness), army members, and medical personnel (Public Service Loan Forgiveness)
Loan cancellations for persons who are chronically incapacitated or who have been misled by their lenders.
Income-driven repayment plans remove earnings or salary from your paycheck to pay down your student debt.
These choices existed before the implementation of the covid forgiveness plans. Check to see if you qualify and have your plan approved.
What More to Expect?
The role of the president and whether he can exercise his executive powers is moot. Advocates claim that the President does have the right and power to use his right in this regard and he should do so. Biden, on the other hand, has rejected using his executive powers. Congress may take some time before consensus is reached and it is unlikely that Biden backs down on his stance regarding presidential powers.
It is also expected that Congress will debate on the issue of student debt and a new law or tweaking of existing laws may happen given the mounting pressure to broaden loan forgiveness. These demands are in addition to covid. President Biden had made promises in his campaign of wide student loan cancellation and reduction in the loan figure of the US.
The Bottom Line
The recent statements by the education secretary and his testimony before the Senate have increased the hopes of wider coverage of student loan forgiveness programs. The Biden Loan Program provided relief to some groups but now the program is expected to continue to expand in addition to the tweaking and easing of the PSLF program.
As a result of the announcement, most students don’t have to make any payments till January. Moreover, no interest will accrue during this time. Check if you fall under the current plan and your loan can be forgiven. But bear in mind, do not stop paying until you are sure of forgiveness. Several proposals are being made, nothing will be certain until a law is passed.
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