Tuesday, October 19, 2021

Answering All Questions About Biden’s Student Loan Forgiveness

Earlier in May this year, Democrats signed a letter to the Secretary of Education Miguel Cardona laying out propositions that would change Public Service Loan Forgiveness (PSLF). Since starting his presidency, Joe Biden has asserted his support to abate $10,000 per student in education loan debt. A few fellow Democrats are aiming at a higher figure, up to $50,000. People from all over the nation are appealing to President Biden to go even further and drop all federal student debt in 2021.

The digital survey to request the administration to fully settle the student loans worth more than a whopping $1 trillion has registered more than 1 million signatures. 

While the amendments are only being proposed now, the seed of a massive student loan forgiveness under the Biden administration was sowed by the American Rescue Plan Act of 2021. The plan did not directly waive off the education loans of Americans. However, it scrapped the biggest block on the road of repayment of these loans. This block was the huge amount of tax that the borrower had to pay at the end of the fiscal year because the government’s amount was waived off until now, added with the borrower’s annual income. This instantly increased the income tax of borrowers by 20% or more.

The move has paved a smooth road for student loan forgiveness that the Biden administration aims at positively.

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What are the changes proposed to the student loan forgiveness under Biden administration?

In March, the U.S. President pardoned $1 billion in loans for students duped by for-profit colleges. However, this is different. The student loan forgiveness proposal signed by Congress members and Senators challenges settling over $1 trillion worth of debts. Therefore, president Biden April inquired Secretary of Education Miguel Cardona whether he has the lawful position to drop student debt.

Public Service Loan Forgiveness is a federal relief program that pardons student loan obligations for borrowers working in a certified public service job for a certain period of time. Under the program, the borrower who successfully pays 120 regular installments of the education loan is exempted from the balance payment.

This letter proposes the following amendments for student loan forgiveness under the Biden administration-

1. to bring all federal loans under the eligibility umbrella.

2. to bring all reimbursement avenues under the eligibility umbrella. 

3. Waive off all the barriers to forgiveness.

4. qualify borrowers automatically. 

As stated by the administrators, the biggest reason behind these amendments is the incompetency of the former administrations in making the benefits of the scheme accessible to people.

How will the plan of student loan forgiveness roll out under Biden administration?

Biden called for pardoning $10,000 of federal student loan debt per individual at the time of his presidential campaign. He likewise spread out extra designs for understudies in the Biden Plan for Education Beyond High School, like free educational cost and more money for federal grants.

Later, Biden marked an executive request to broaden the delay on educational loan installments and interest till the end of September. Previous President Donald Trump suspended installments toward the beginning of the pandemic, and the credit suspension was expanded twice more.

Here are the proposed changes to the program and how they might affect the fate of PSLF. 

1. Make all government student loans eligible

Under this amendment, the Biden administration aims at making the process of obtaining student loan forgiveness easier than ever. How? By eliminating the additional step of consolidating the student loan into a Direct Consolidation Loan. This additional step is required for the borrowers who owe FFELP or Federal Family Education Loan Program.

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Although the PSLF is accessible to all the borrowers working in qualified public services and who successfully repay 120 installments without any default. However, individuals with FFELP often missed out on benefiting from the PSLF due to the long process of merging their loans with a Direct Consolidation Loan.

This amendment will go a long way in making the process more convenient.

2. Make all reimbursement plans eligible 

This amendment is introduced to make everyone eligible for the student loan forgiveness plan. Yes, there is a filter as to who can and who cannot be benefitted from the program. An individual can only claim PSLF if enrolled in an income-driven loan repayment plan. A significant imperfection in qualification for PSLF spins around the reimbursement necessities.

Congress introduced the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF) in 2018 to fix this issue. TEPSLF permitted borrowers to make installments under graduated or broadened reimbursement plans. However, this again had a high rejection rate.

The idea of this amendment is to eliminate all such hurdles and make student loan forgiveness accessible for all student loan repayment plans.

3. Forgo limitations at season of forgiving

Another stated condition to qualify for student loan forgiveness is working under the public service sector or a social welfare initiative. Additionally, the borrower must have discharged 10 years of service in mentioned sectors before availing the forgiveness of the student loan for the remaining amount.

In the wake of the COVID-19 outbreak, a plethora of these jobs are also wiped out, therefore, resulting in unfair limitations for borrowers to be eligible for PSLF.

The proposed amendment asks for the Department of Education to allow borrowers, regardless of their occupation, to be eligible for forgiveness given that they complete10 years of service.

4. Automatically eligible borrowers 

Another problem with the qualifying criteria of the program is, the individuals applying for PSLF need to proactively submit the information about their employer to the federal government.

Department of Defense, in association with the Office of Personnel Management, should set secure data sharing in place that allows the automatic identification of individuals employed in the public service sector and who holds the record of successful repayments of federal debts.

How much would the Biden administration forgiven in student loans?

There is no clarity about the figure that Congress might move ahead with to cancel the student loans. However, in the letter proposed before the Department of Education, the Biden administration has decided on student loan forgiveness at $10,000 per student.

However, there are Congress members who are appealing for a higher figure. Democratic Senators from New York Chuck Schumer and Elizabeth Warren, senior Senators from Massachusetts, are requesting President Biden to increase the amount to $50,000.

In addition to these figures, a digital petition has registered signatures from more than 1 million Americans requesting President Biden to forgive student loans entirely.

How to prepare yourself to be eligible for student loan forgiveness by Biden administration?

Here is what increases your odds to secure student loan forgiveness-

1. Borrowers who attended a public college or university. This also includes private historically black colleges and universities and other institutions for minorities.

2. If the borrower took the loan for undergraduate tuition.

3. If the borrower’s earnings are under the set bracket of $125,000.

Did you know you are entitled to a refund for repayment of your loan?

If you paid your student loan repayment last year, you must know that you are entitled to a refund. In the wake of the COVID-19 outbreak,

Congress enacted CARES Act last year, which temporarily suspended all the repayments by citizens on the federal student loans. This relief has been extended till Sept 30, 2021. Despite 90% of borrowers who benefitted from the program, there were still millions who paid their education loan installments last year.

According to the Department of Education, “Any payment you made during the suspension of payments (beginning March 13, 2020) can be refunded.”

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