President Joe Biden’s plans for student loan reform – and forgiveness – Forbes advisor

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This story is part of a series about the new Biden administration and what he has planned for his first 100 days – and beyond.

The first 100 days of President-elect Joseph R. Biden’s presidency will likely focus on addressing the pandemic and implementing policies that can help Americans continue to weather the resulting economic storm. Reshaping higher education and providing student loan facilities is expected to be a major focus of Biden’s administration.

Read more about Biden’s first 100 days:

Biden has lofty goals for student loans and improving the financial health of working-class Americans – and he says the cost of his plans will come in part from increasing taxes for businesses and the richest households (those who make $ 400,000 or more a year earn) are covered. .

There is no guarantee that any of Biden’s proposals will actually become law – they have to be passed in Congress first. That might be more likely now that the Democrats control both houses of Congress, but there are still no guarantees. Here’s what might be on the table when Biden opens on January 20th.

An ongoing hiatus in student loan payment during Covid-19

The Biden administration is already planning to extend the current deferral period for federal student loans, which began in March 2020 and was last extended to the end of January 2020.

“On the first day, the President-elect will instruct the Department of Education to extend the existing student loan and interest payment hiatus for millions of Americans on federal student loans,” said David Kamin, a Biden transition adviser and future deputy director of the National Economic Council. during a press conference on January 8th.

It is currently unclear how long the forbearance will be extended, but Biden is is expected to announce a massive stimulus plan this week that may contain details.

Is Student Loan Forgiveness Still On The Table?

We might see Biden pay off some of the student loan debt for borrowers, but it can be less than. be many liberal advocates have pushed for it. While he doesn’t have a widespread student loan cancellation plan, as other Democrats did during the presidential primaries, Biden supports in response to the coronavirus pandemic (which is particularly leaving borrowers out, the private student loans), which Kamin confirmed during the press conference.

The emergency aid proposal that Biden refers to in his March tweet, the first time he has spoken out in favor of terminating the federal student loan. was founded by a group of Democratic Senatorsincluding Senate Minority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA).

The plan calls for borrowers to see their student loan payments still interest-free during the coronavirus crisis. For borrowers who have defaulted, the plan would suspend garnishments of wages, tax refunds and social security benefits, and interest capitalization.

However, canceling federal student loans won’t be easy. Biden can either ordinarily cancel the debt himself or ask Congress to cancel it, leaving no guarantee that it will happen.

Tuition-free colleges and universities

The cost of education is one of the main reasons young Americans struggle with student loans. “The Biden Plan for Education Beyond High School“Tried to solve this problem.

The plan would make public colleges and universities free for students from families who earn less than $ 125,000 a year. This aspect of his plan comes from a suggestion made by Senator Bernie Sanders (D-VT), known as the College for All Law of 2017. According to the law, around 80% of the population would qualify for free classes.

Biden also suggests two years of free community college. The funds to cover these costs could be used by anyone, not just high school graduates, and could also be used for training programs “that have a track record of students completing their programs and securing good jobs,” Biden suggested.

Revision of the repayment plans for student loans

The current Federal student loan repayment system is a dizzying collection of plans that can be confusing to navigate.

Some of the federal student loan repayment plans tie the monthly payments to your income, and each plan has its own duration of 10 to 30 years. For example, the earnings-based repayment schedule sets the monthly payments at no more than 15% of the borrower available income and grants credit relief after 25 years of qualified payments.

Biden’s plan would greatly simplify the federal student loan repayment system. Borrowers earning more than $ 25,000 a year would all be enrolled in an income-oriented repayment plan with the following guidelines:

  • Payments would be set at 5% of disposable income (the amount of money a person has after paying for necessities such as food and shelter).
  • The balance would be waived after 20 years of qualifying payments
  • The remitted balance would not be treated as taxable income
  • Borrowers would have the option to opt out of the program

Biden also suggests removing student loan payment obligations for borrowers earning $ 25,000 or less per year. Individuals with incomes below or below this threshold would also have the interest rate on their student loans set at 0% so that the loan amount would not increase while they were not making payments.

Create a New Public Service Loan Granting Program

The Public Service Loans Program (PSLF) is available to individuals making 120 qualifying student loan payments while in the public service, e.g. But the program has been fraught with administrative problems over the yearsmaking it extremely difficult for some people to properly qualify for forgiveness – even after they have made all of their payments.

Biden would simplify the PSLF program by providing $ 10,000 student loan debt relief for each year of national or community service for up to five years. People who work in schools, government agencies, or non-profit organizations are automatically enrolled in the program.

Approval of private student loans in the event of bankruptcy

It is possible to redeem government and private student loans in bankruptcy, but it is a difficult process. Borrowers must prove in court that they face “undue hardship” because of their loans, which can be a costly hurdle for Americans already struggling to repay.

Biden’s plan would expand the circumstances under which private student loan borrowers are eligible to repay their bankruptcy loans. The campaign says it would adopt a 2015 Obama-Biden administration proposal to make this happen. Under the proposal, Congress would withdraw the Bankruptcy Abuse Prevention and Consumer Protection Act from 2005, which prohibited the redemption of private student loans in bankruptcy.

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