If you’re one of the 45 million Americans with student loan debt, you’re probably all too familiar with the monthly burden of making your loan payments. But there’s some relief on the horizon: President-elect Joe Biden has proposed a plan that would cancel $10,000 of federal student loan debt for every borrower. Keep reading to find out more about this proposed plan and what it could mean for you.
What is Biden’s Student Loan Forgiveness Plan?
Under the Biden Student Loan Forgiveness Plan, $10,000 of federal student loan debt would be forgiven for every person with a household income of less than $25,000. This forgiveness would be available to both current and former students. The plan would also make it easier for people to repay their loans by capping monthly payments at 5% of their income.
The Biden Student Loan Forgiveness Plan is a proposed policy that would forgive $10,000 of federal student loan debt for every person with a household income of less than $25,000. This forgiveness would be available to both current and former students. The plan would also make it easier for people to repay their loans by capping monthly payments at 5% of their income.
The purpose of the plan is to ease the burden of student loan debt for those who are struggling to repay their loans. It would also make it easier for people to continue their education by making it more affordable.
If you are a borrower with a household income of less than $25,000, you could potentially have your entire student loan balance forgiven under this plan. This could be a huge relief if you are struggling to make your monthly payments. If you are currently
What is Biden’s Student Loan Forgiveness Plan?
In August 2020, then-Presidential candidate Joe Biden announced his plan for student loan forgiveness. Under the plan, borrowers would be able to have their federal student loans forgiven after 20 years of repayment (10 years if they work in public service). Private student loans would not be eligible for forgiveness under the plan.
The plan would also make it easier for borrowers to enroll in income-driven repayment plans, which cap monthly payments at a percentage of a borrower’s income and forgives any remaining balance after 20 or 25 years (depending on the plan). Under current law, only federal student loans are eligible for income-driven repayment; private student loans are not.
Borrowers who have already made payments on their loans would be able to have those payments counted towards the 20-year/10-year forgiveness timeline. And borrowers who are currently enrolled in an income-driven repayment plan would have their remaining loan balance forgiven after 20 or 25 years (depending on the plan), as opposed to the current 40-year timeline.
There is no information on how much this plan would cost, or how it would be funded.
How much debt will be forgiven under the plan?
Under the plan, borrowers will have their remaining student loan debt forgiven after 20 years of repayment. Forgive means to cancel a debt or obligation. The 20 years of repayment includes any payments made while in an income-driven repayment plan or through other programs like the Public Service Loan Forgiveness Program.
Income-driven repayment plans are based on your income and family size. They can significantly lower your monthly payment, but they also extend the length of your loan and increase the amount of interest you pay over time. Under the plan, your monthly payments would be capped at 10% of your discretionary income. Discretionary income is the difference between your adjusted gross income and 150% of the poverty line for your family size.
The Public Service Loan Forgiveness Program forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible public service job or nonprofit job after 10 years of making 120 qualifying monthly payments.
So, if you’re currently in an income-driven repayment plan or the Public Service Loan Forgiveness Program, you would still need to make 20 years of qualifying monthly payments before having your remaining debt forgiven under Biden’s Student Loan Forgiveness Plan
Who is eligible for student loan forgiveness under the plan?
If you have Direct Loans—which are loans from the federal government—you may be eligible for student loan forgiveness after 20 or 25 years of payments, depending on when you took out your loan. If you have FFEL or Perkins Loans, you may be eligible for student loan forgiveness after 10 years of payments.
To be eligible for student loan forgiveness under the plan, you must:
-Have made 120 qualifying monthly payments on your Direct Loans or FFEL/Perkins Loans
-Be employed full-time by a qualifying employer during your repayment period
-Have made all of your payments under a qualifying repayment plan
If you’re not sure whether you have Direct Loans or FFEL/Perkins Loans, you can check your Loan Summary in the National Student Loan Data System.
When will the forgiveness happen?
In his most recent presidential campaign, then-candidate Joe Biden proposed a plan to offer federal student loan forgiveness after 20 years of repayment. The plan would also cancel $10,000 of debt for borrowers with incomes below $25,000.
This plan is similar to the existing Public Service Loan Forgiveness program, which forgives federal student loans after 10 years of repayment for borrowers who work in public service jobs. But the Biden proposal would extend this benefit to a wider range of borrowers.
There are no details yet on when this forgiveness would take place, or how it would be funded. But if implemented, it could provide relief for millions of Americans struggling to repay their student loans.
Under the Biden Student Loan Forgiveness Plan, borrowers would have their loans forgiven after 20 years of repayment. Although this plan would provide some much-needed relief to struggling borrowers, it could also end up costing taxpayers billions of dollars. Only time will tell whether the benefits of this plan outweigh the costs, but one thing is for sure: student loan forgiveness is a hot topic that isn’t going away anytime soon.