Critical Changes Happening To Student Loan Forgiveness Plan, Here’s What You Need To Know
Borrowers who make under $30,000/year can qualify for student loan forgiveness and pause their payments altogether, while borrowers with loans of under $12,000 can be eligible for loan forgiveness after ten years.
Nothing is ever easy, is it? Especially not in a divided government with battle lines directly down the middle these days. If Democrats come up with an idea, Republicans block it, and vice versa. Sometimes it seems it doesn’t even matter who the president of the United States is because that person doesn’t hold ultimate control (by design, of course). But when President Biden(D) announced in 2022 that student loan forgiveness is on his agenda, there was much cheering and then booing. How could his declaration be legal?
The recent pause on loan repayments (thanks COVID) is ending this June and Sallie Mae will come looking for her money. Although Biden announced he would cancel repayments and have student loan forgiveness altogether, it’s being held up in court as justices examine the legality of that decision.
According to PBS, the Biden Administration has offered another way to get some debt paid back, but also help those just starting out and not making a ton of cash. The new proposal says that if you make under $30,000/year, you can qualify for student loan forgiveness and pause your payments altogether. Also, for small loans, $12,000 or less, those folks could qualify for forgiveness after ten years, instead of the current 20 years.
This plan makes sense to many people because when an interest rate is exploding (like our current ones are), it is almost impossible to even touch the principle of that loan. Lower-income borrowers should like this student loan forgiveness plan. The preferred audience for this plan is targeting undergraduate grads who are just starting to get their lives together.
According to the Department of Education, this plan will cut their loan payments in half. The plan is open to new and current borrowers. However, if parents or caregivers have a Parent PLUS loan, this new plan does not apply. (Sorry, mom and dad).
Borrowers now need to know that while things are in the hands of the Supreme Court, we wait. However, there already is a timetable for that waiting. That timetable has already been drawn up by the Department of Education and the current administration. Whatever the Supreme Court decides, millions of borrowers will have loans left over that they will have to start repayments on.
If the court finds Biden’s plan legal, the deficits will increase by $600B over a decade. Cuts will have to be made to other programs, which leaves many people scrambling trying to figure out what to cut. Folks must consider that the Office for Federal Student Aid has a lot of work ahead of it, with or without student loan forgiveness.
The Office has to revamp the federal student aid form, sign new contracts, and then figure out how to implement the program overall. Also, at the same time, the Office is in the middle of a budget crisis where it must scale back many of its efforts for 2023. In another story, law professors in a brief to the Supreme Court, say they think the student loan forgiveness plan is unlawful. But, they want the court to reject legal challenges brought against the policy.
