With all the headlines about student loan abolition in mind, let’s separate fact from fiction.
Here’s what you need to know and what it means to you.
Before you start hoping for a student loan cancellation, it is important to understand the following in order to have a complete understanding of the latest developments regarding student loan forgiveness:
1. There is no guarantee that the student loan will be canceled.
President Joe Biden wants to cancel student loans immediately… Likewise, Democrats in Congress want to cancel student loans now. But, that’s where the agreement ends… While Biden is demanding the forgiveness of a $ 10,000 student loan, some Democrats, including Senator Elizabeth Warren (M.D.) and Senate Majority Leader Chuck Schumer (New York), want to cancel the $ 50,000 student loan … The differences don’t end there. Biden wants Congress to pass legislation to abolish student loans, while Democrats want Biden cancel student loans in the amount of US $ 50,000 by order of the government… Warren and Schumer, taking a textual approach to the legislative interpretation of the 1965 Higher Education Act, say Biden has congressional powers to revoke student loans by executive order. Biden says he’s unlikely to do so, meaning he doesn’t think the president has unilateral powers to revoke billions of student loans. Instead, Biden, a former US Senator from Delaware, likely agrees that Congress is the appropriate arm of government for making federal spending decisions. The good news for borrowers is that Biden Considers Canceling Student Loan By Order… However, there is no guarantee that Biden can unilaterally cancel student loans, nor any guarantee that Congress has enough votes to cancel student loans.
2. You will not receive a student loan cancellation on all student loans.
This may come as a surprise to many student loan borrowers, but no discussion of writing off all student loan debt… (Here what the new stimulus package says about the cancellation of the student loan, if there is an indication of where what stands). It is important to clarify this point so that borrowers can equalize their expectations. Senator Bernie Sanders (I-VT) has offered to write off all of the $ 1.7 trillion student loan debt. However, Congress is not considering his proposal, and there is no expectation that Schumer, Warren or Biden will support this position. Both Warren-Schumer’s and Biden’s proposals also focus only on federal student loans. However, Congress may pass this is another student loan forgiveness proposal from Sanders.
3. Not everyone will receive student loan forgiveness.
Another potential surprise for student loan borrowers is that not everyone will get a student loan forgiveness… It is not as easy as saying “forgive a student loan” or “forgiven a student loan.” Even if Congress decides to cancel the student loan and Biden signs the law, there will be restrictions. For example, only federal student loans are likely to be eligible. Secondly, maybe income restrictions on who is eligible… Currently, Warren and Schumer say that only borrowers who earn $ 125,000 a year or less can qualify. If Congress lowers the income threshold to test incentives in the new stimulus package, it could be bad news for student loan cancellation… Perhaps Congress will also lower the income threshold for student loan forgiveness. For example, Congress could potentially cap qualifications to $ 50,000 for individuals and $ 100,000 for married or joint applicants, which is the same income cap proposed for the new incentive package.
4. Cancellation of a student loan is only possible due to college debt.
If you only have PhD loans, you may not get a student loan forgiveness… It is possible, but not guaranteed, that Congress Cancels Student Loans just for college debt. Some of Biden’s student loan cancellation proposals only apply to a college student loan. Why? Almost 50% of student loan debt belongs to student loan borrowers, many of whom earn higher income as doctors, lawyers, and dentists. Consequently, if Congress forgives student loans, Congress may focus on college debt only to exclude borrowers with higher incomes and professional degrees.
5. Congress may change income-based payment plans.
It is important to remember that if you have federal student loans and are struggling to pay off student loans, income-driven repayment plans offer student loan forgiveness. These plans include income-based payment (IBR), pay-as-you-go (PAYE), revised pay-as-you-go (REPAYE), and contingent-of-income repayment (ICR). Although student loan forgiveness is not an advance, you can get student loan forgiveness after 20 years (student loans) or 25 years (student loans) monthly payments. For income-driven repayment plans, your monthly payment can be as low as $ 0 and is dependent on discretionary income, family size and country of residence. Biden has plan to improve repayment plans based on income for borrowers. In addition to (or in lieu of) early student loan cancellation, Congress may decide to change existing income-driven repayment plans. Possible changes include, for example, limiting monthly payments to 5% of discretionary income or tax exemptions for borrowers for student loan forgiveness.
Will your student loans be canceled?
Will your student loans be canceled? The reality is that it is not clear. This is not to scare you; Student loan borrowers are under enough pressure trying to pay off the student loan. Rather, the goal is to provide more transparency in light of the current circumstances so that you know what to expect if you do not receive a student loan cancellation. Congress may be canceling student loans, but Congress is currently more focused on pressured Biden to cancel student loans, rather than passing a separate law. Biden suggested three ways to pay off student loan debttherefore Congress may also decide to forgive other student loans. However, until that happens, it is unclear if canceling the student loan will become law and when it will happen. So, in the meantime, make sure you have a student loan game plan. Get started with these three options, all of which are free: