10 questions about Biden’s plan to cancel student loans
President-elect Joe Biden (Photo by Ethan Miller / Getty Images)
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Have questions about Joe Biden’s plan to cancel student loans?
Here is what you need to know.
Student loans
Will you get your student loan forgiven? When will you get your student loan forgiveness? Here are some of the questions you might ask yourself if your student loans are canceled. Here are the answers to the 10 most common questions about President-elect Joe Biden’s plan to cancel student loans:
1. When will I get my student loan forgiveness?
There is no specific date when you will get your student loan forgiven. President-elect Biden called on Congress to cancel student loans immediately. That said, Congress will not cancel student loans during this term of Congress. Why? Republicans control the US Senate and do not support large-scale student loan cancellation. The outcome of two US Senate second-round elections in Georgia will determine the composition of the next Congress. If Republicans retain control of the US Senate, the road to student loan cancellation in Congress becomes much less likely. If the Democrats take control of the US Senate, the road to canceling student loans becomes easier. However, there is no guarantee that Senate Democrats will ultimately write off student loans, or the amount of student debt that would be written off. Other Democrats like Senator Elizabeth Warren (D-MA) called on Biden to cancel student loans on his first day in office, January 20, 2021.
2. How much student loan forgiveness will you get?
Many student loan borrowers ask for “How much student loan forgiveness will I get?”“The amount of the student loan cancellation has not been finalized. Biden wants to write off up to $ 10,000 in student loans for each student borrower due to the Covid-19 pandemic. Warren and Senate Minority Leader Chuck Schumer (D-NY) want Biden to write off $ 50,000 in student loans for every borrower. Other proposals have called for $ 30,000 for student loan cancellation. It’s possible that one of these proposals could pass, but if Democrats want a chance of reaching a bipartisan deal to cancel student loans, a small amount would be more likely to pass (if Republicans even considered the cancellation. student loans, which is unlikely). Of all the proposals, therefore, $ 10,000 is probably the most realistic amount of potential student loan forgiveness.
3. Will I be eligible for the student loan forgiveness?
It is possible that if there is a student loan cancellation plan, you may not be eligible. This may come as a surprise. However, the tendency has been to apply the student loan discount to borrowers who need it the most. It’s too early to say who would qualify, but there are some initial hints. For example, this week Schumer said his and Warren’s proposal to cancel only student loans would be available. if you earn that much income. Therefore, not everyone would eligible for cancellation of their student loans. Likewise, Biden has said he will support a stimulus package like the Heroes Act, which House Democrats passed earlier this year. However, the Heroes Act would only cancel private student loans of up to $ 10,000 granted to “economically troubled” borrowers. This means that the student loan forgiveness can only be offered to borrowers who are in financial difficulty. Similarly, opponents of a large-scale student loan cancellation believe that any student loan cancellations should target those who are unemployed or who have been directly affected by the Covid-19 pandemic.
4. Will the president cancel student loans by order in council?
Warren and Schumer want Biden to cancel student loans by executive order. They believe it might be difficult for Congress to approve a bipartisan plan to write off student loan debt. Therefore, they want Biden to bypass Congress and unilaterally cancel student loans. Warren and Schumer believe that the Higher Education Act of 1965 also grants the president (through the US Secretary of Education) the unilateral right to write off student debt. however, Biden did not support the proposal and said Congress should pass legislation to cancel student loans.
5. Will the student loan forgiveness be tax free?
Biden’s plan to cancel student loans would be tax-free for the borrower. For example, if you receive a $ 10,000 student loan forgiveness, you will not owe income tax on the $ 10,000 student loan forgiveness under the Biden plan. In comparison, current income-based repayment plans would write off your remaining federal student loan debt after 20 or 25 years of monthly student loan payments. However, this student loan discount is considered taxable for the borrower.
6. Will there be a tax credit or cash payment for borrowers who have already paid off their student loans?
Opponents of large-scale student loan forgiveness say there is many reasons not to cancel student loans. For example, any proposed student loan cancellations would occur in a single day. This means that anyone who has paid off their student loan in full before that day would be excluded from any student loan debt cancellation. Many wonder if these former student borrowers would receive a tax credit or a cash payment. Opponents of this policy say the federal government cannot retroactively compensate borrowers who no longer have student loans. However, many of these borrowers sacrificed buying a home, worked two jobs, or stopped saving for retirement so they could pay off their student loans. That’s not to say that those who might qualify for a large-scale student loan cancellation haven’t done the same, but it’s a matter of fairness whether a former borrower who recently paid off loans students should be reasonably compensated. In addition, there are tens of millions of other adult Americans who have never gone to college or graduated and who are also struggling financially. Is it fair to cancel student loans for a relatively smaller portion of the population and not provide economic stimulus to others who may also be in need of financial reprieve?
7. Does Biden support other student loan forgiveness?
In addition to large-scale student loan forgiveness, Biden also supports other student loan forgiveness. Biden would revamp the Public Service Loan Forgiveness, which he would continue in his administration. Specifically, Biden wants to grant a federal student loan cancellation of $ 50,000 after five years, rather than making borrowers wait at least 10 years after making monthly student loan payments to get their student loan canceled. Biden would also cancel student loans for borrowers who attend a two- or four-year college or public university and earn less than $ 125,000 a year. This would also include historically black private colleges and universities (HBCU) and institutions serving minorities (MSI).
8. How will this affect the cancellation of public service loans?
If you are participating or planning to participate in the public service loan forgiveness program, you may be eligible to have your student loans canceled. Therefore, a large-scale student loan cancellation shouldn’t impact you differently because you are looking for a public service loan forgiveness. As part of Biden’s plan, the public service loan forgiveness would still be available to student loan borrowers and would offer a federal student loan forgiveness, which would be in addition to any large-scale student loan cancellations.
9. Does Biden have any other student loan plans?
Biden has a comprehensive plan for student loans. This includes a variety of initiatives including canceling student loans, setting income-based repayment plans, freeing some college tuition, canceling student loans in bankruptcy, and other plans to provide financial relief to student borrowers.
10. What’s the best way to get student loan forgiveness?
Currently, the two best ways to get student loan forgiveness are income-based repayment plans and public service loan forgiveness. Income-driven repayment plans are only for federal student loans and are best if you’re having trouble paying off student loans. Your monthly payment will be based on your discretionary income, your family size and your state of residence. After 20 or 25 years, you can get a student loan discount on your remaining balance. However, the amount of the student loan forgiveness is taxable. The public service loan forgiveness offers a federal student loan forgiveness whether you work for a qualified public service or a non-profit employer. You must make 120 monthly payments and meet other conditions to get your student loan forgiven.
How to repay student loans
There is no guarantee that you will get full forgiveness on your student loan. If this happens, it can only help you with some of your student loans. That is why you must have a student loan repayment plan now. What’s the best way to pay off student loans? Get a student loan game plan. Here are three smart approaches, all at no cost: