Student Loan Forgiveness: New Blockbuster Plan to Cancel Student Loans

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Republicans have proposed to box office success new student loan forgiveness plan.

Here’s what you need to know – and what it means for your student loans.

Student grants

President Joe Biden is just days away from announcing his decision on broad student loan forgiveness. Before that happens, however, Republicans in Congress have passed major legislation to change the future of student loan debt and student loan forgiveness. Representatives Virginia Foxx (R-NC), Elise Stefanik (R-NY), and Jim Banks (R-IN) introduced the Responsible Education Assistance Through Loan (REAL) Reforms Act to propose an alternative proposal for student loan forgiveness by Biden. Here’s what’s in their plan for student loan forgiveness.


Student Loan Forgiveness: The Details

Specifically, this proposed student loan waiver legislation would provide, among other things:

  • existing student loan borrowers enrolled in an income-driven repayment plan would only have to pay their original student loan balance plus 10 years of student loan interest;
  • end the student loan payment break;
  • terminate the public loan forgiveness program for new student loan borrowers;
  • no large-scale student loan waiver of any amount;
  • create a new single income-driven repayment plan, similar to means-tested amortization (IBR) to replace existing income-driven repayment plans;
  • eliminate student loan forgiveness through income-driven repayment plans;
  • end Grad PLUS student loans, which would limit how much graduate student loan borrowers could borrow;
  • final capitalization of student loan interest, which is the addition of accrued student loan interest to your student loan balance;
  • helping student loan borrowers who default on repay their student loans a second time; and
  • prevent the U.S. Department of Education from using the negotiated regulatory process to enact regulations that are economically significant (such as over $100 million), including large-scale student loan waivers.


Biden may announce student loan forgiveness any day

Biden is just days away from one of the biggest decisions of his presidency: canceling student loans for more than 40 million student loan borrowers. According to leaked student loan cancellation documents from the U.S. Department of Education, Biden is considering $10,000 in student loan waivers for student loan borrowers. Here’s who can qualify for student loan forgiveness. While Biden hasn’t made a final decision yet, the potential announcement of whether Biden will introduce student loan forgiveness could come days before the end of the student loan payment break on August 31, 2022. Since becoming president, Biden has canceled more than $25 billion in student loans. This includes $8 billion in student loan waivers for nearly 150,000 government officials. Biden is working to simplify student loans. He recently postponed a new student loan plan that could rival the Republican proposal for means-tested student loan repayments. Biden also suggested making the limited student loan forgiveness waiver permanent, which would benefit student loan borrowers seeking public service loan forgiveness. In contrast, Republicans proposed to abolish public loan forgiveness. Republicans want to limit Biden’s ability to use the negotiated regulatory process at the Department of Education to make major policy changes. Biden, however, wants to make major changes to student loans, including a proposal to lower student loan interest and major changes to student loans.


Student loans: next steps

While this proposed legislation is unlikely to pass Congress, the proposal raises important questions about the future of student loans. Biden and Democrats in Congress want to expand access to higher education, offer more student loan waivers, and help student loan borrowers find easier ways to pay off student loans. By contrast, Republicans want to limit federal spending, prevent Biden from canceling more student loans, end expensive student loan forgiveness programs, and limit the president’s ability to make significant changes without limiting congressional authority. If Republicans gain control of Congress and the presidency, this proposal could provide a glimpse into the future of student loans. That said, student loan forgiveness isn’t the only issue that is a top priority for student loan borrowers. Payment of the student loan will stop within a few days. That means student loan borrowers should expect to be able to restart student loan payments from September 1, 2022. Are you prepared? Here are some of the most popular ways to pay off student loans faster and save money:


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