Republicans have proposed ending student loan forgiveness for millions of student loan borrowers.
Here’s what you need to know – and what it means for your student loans.
A new blockbuster student loan proposal from Congressional Republicans would eliminate one of the most popular student loan forgiveness programs: public loan forgiveness. A new bill from Representatives Virginia Foxx (R-NC), Elise Stefanik (R-NY) and Jim Banks (R-IN) would put an end to the difficult student loan cancellation program.
According to their proposed legislation:
- the public loan forgiveness program would be abolished;
- student loan borrowers currently seeking public loan forgiveness would be protected; and
- this student loan waiver would end after July 1, 2023.
End of public service loan forgiveness
It’s not the first time Republicans have proposed ending public loan forgiveness. For example, Republicans say Biden canceled $400 billion in student loans and that there should be no more student loan waivers, especially one-time, large-scale student loan cancellations. In his annual budget, President Donald Trump proposed ending public service loan waivers, amid other cuts to the U.S. Department of Education and recommendations to amend student loans. Congress established the Public Loan Forgiveness Program in 2007, which allows borrowers to cancel their federal student loans if they meet certain requirements. For example, student loan borrowers must be employed full-time (at least 30 hours per week) with an eligible employer or nonprofit employer and pay at least 120 monthly student loans. The program has struggled for years with rejection rates of up to 99% for borrowers. However, Biden proposed major changes to student loans so that more student loan borrowers are eligible for student loan forgiveness. For example, Biden canceled $8 billion in student loans for government officials. Biden has also introduced a limited student loan waiver, allowing student loan borrowers to “count” past student loan payments that were previously ineligible for student loan forgiveness. Last month, Biden proposed extending this limited student loan forgiveness waiver beyond October 31, when it expires. He also delayed the announcement of a new student loan repayment plan. That said, Biden could soon introduce a simplified income-driven repayment plan.
Student Loan Cancellation: Why Terminate Student Loan Forgiveness?
Biden and some Republicans in Congress disagree on the future of student loan forgiveness. Proponents of public loan forgiveness recognize that the program needs to be modified. However, they believe the program is an essential student grant for police officers, firefighters, military personnel, teachers, nurses and other officials. Democrats also recognize that ending student loan waivers for government officials could discourage student loan borrowers from seeking careers in the public sector and nonprofits. Republicans opposed to student loan forgiveness want the federal government to save billions of dollars. They believe that forgiving student loans is an unfair redistribution of wealth, benefiting high-income earners and Americans who have not attended college or who have no student loans. Since Democrats control Congress and the White House, this proposed legislation is unlikely to become law any time soon. However, other components of the bill, such as the abolition of capitalized student loan interest, could be incorporated into a broader student loan reform.
Student loans: next steps
Biden faces three major student loan deadlines. In the coming days, Biden has said he will decide whether to introduce large-scale student loan forgiveness. This decision is independent of the public loan waiver, which is a separate federal program. Biden could also address the future of student loans with additional changes to student loans and student loan repayment. The student loan payment break ends within a few days. This means that student loan borrowers must be willing to restart student loan payments on September 1. Here are some of the best ways to pay off student loans and save money:
Student Loans: Related Literature
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