What is President Biden’s Loan Forgiveness Agenda?

President-elect Joe Biden comes with some plans regarding student loan forgiveness. These plans include benefits for students who took out loans. What exactly is the student loan forgiveness plan, though, and what does it include? Here’s all you need to know regarding the plans of the president-elect.

Joe Biden Student Debt Strategy

There have been many proposals made by the Joe Biden platform. And these proposals include some changes for people who are studying and need to take loans. But there are also other changes for those in higher education.

But let’s take a more detailed look at the proposals made by the Biden administration and see what’s in store for students. Before that, though, you should know that the proposals may or may not happen, and they may change a bit too if they do end up happening. Overall, it’s important to keep an eye on the administration and see how things evolve.

Extending Automatic Forbearance

The federal student loan forbearance started back in March. It was extended a second time not long ago, on December 4, 2020. After that, it was supposed to end on January 31, so most students were expecting that.

However, the Biden administration said that things may be different after the president-elect is in charge. The plan, which was announced on January 8, was to have the Department of Education extend this pause as quickly as possible. So far, we don’t really know how long this extension is going to be, we just know that it is planned.

Then, the administration forbearance will automatically pause the payments on the majority of the federal student loans. New interest on the loan balance will be waived as well. The collection activities on default loans will be halted too.

Canceling Existing Student Debt

Some of the students who have federal student debt may have a reason to be happy, as a part of the debt will be canceled. Of course, it all depends on the particular situation of the student.

The federal student debt may be canceled if:

• Your earnings are in total under $125,000. There aren’t too many details on this matter, even though the plans make a phase-out reference for this part.
• You used your loans for undergraduate tuition. Of course, this means that people in undergraduate programs who used loans for that purpose will not have their debt canceled.
• You went to a public university or college. On top of that, people who were attendees of private historically black colleges and universities, as well as some other institutions that serve minorities may also qualify for this benefit.

The president-elect’s intentions also include canceling $10,000 of federal student loan debt per person. This is all part of the COVID-19 relief. Based on the federal data, there are about 15 million people who have debts of $10,000 or less. Other than that, most people have debts that exceed this amount.

At the same time, it’s essential to know that the new proposals will not affect the borrowers who have private student loans. At the same time, president-elect Biden supports making it easier to discharge private student debt in bankruptcy.

Revised Income-Driven Repayment

There was also a new income-driven repayment plan proposed for federal student loans. There are a few things to keep in mind in this aspect, though.

• Students would have to pay 5% of the discretionary income. The income-driven options that are applying at the moment set the payments between 10% and 20% of the discretionary income. This depends on the particular plan, of course.
• There will not be taxes on forgiveness. The income-based plan from Biden would forgive the remaining undergraduate balance tax-free after 20 years. There will be other options for forgiveness after 20 or 25 years pass, and it all depends on the plan. Usually, though, these forgiveness options are taxed.
• Undergraduate loans will be the only ones qualifying. That being said, it will not be possible for graduate student loans to qualify. These loans have an average student debt of $71,000 based on what the National Center for Education Statistics is saying.
• If your earnings are less than $25,000, then the monthly payments would be $0. It will all depend on the income, the size of your family, and the federal poverty line.

Large Pell Grants

Pell grants may get bigger too, based on the new proposals. These grants are usually given to students who are in great financial need and are able to prove it. The grants are up to $6,345. But that’s not enough considering it is only able to cover less than 60% of the tuition and fees when it comes to public four-year colleges. So, not only may they get bigger, but Biden may also end up making them more accessible, and giving middle-class students the chance to get them as well.

Student Loan Forgiveness Programs

People who provide public service may have a new student loan forgiveness program introduced for them.

What you should know about it is that it will not be a replacement for Public Service Loan Forgiveness. Also, Biden may rework PSLF, which means half of your balance might be forgiven after 5 years. Around 98% of the PSLF applications have been rejected up till now.

It’s also possible for as much as up to $50,000 to be forgiven. If the plan is going to apply, then you will have $10,000 of your debt instantly canceled for every year you perform eligible service. The total is up to five years.

Free Tuition

Under Biden’s plan, some colleges may offer free tuitions.

If you attend any private minority-serving institution, then the grants can cover up to two years of tuition. It will apply if you attend any historically black university or college. The same goes for tribal universities and colleges, and other MSIs. You will also be tuition-free for four years if your family’s income is less than $125,000.

Other than that, if you go to community college, you would be tuition-free for two years. Of course, this will be possible as long as you hadn’t previously pursued any postsecondary degree.

Bear in mind, though – even with this, you will have to deal with the non-tuition costs, like your books, room, and other necessary things.

Restored Borrower Defense and Repayment Rules

Apparently, the Biden administration also plans to reinstate rules for borrower defense to repayment. These are rules that were restricted by the Trump administration. This rule will be able to forgive loans for borrowers who were previously defrauded by the school they attend.

Other Potential Strategies

There are some other potential strategies. For instance, Biden plans to invest $50 billion in workforce training. He also plans to invest $70 billion for minority-serving institutions, and $8 million toward community colleges.

Conclusion

There are many plans made by the Joe Biden administration regarding student loan forgiveness, but we don’t know yet if everything will become reality. If they do, they may change a little bit until they are put into practice. It’s important to keep an eye on the Biden administration’s plans and you’ll be up to date with what’s happening.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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