The student loan crisis continues to gain momentum on a national stage, including being a central theme of this year’s election. Let’s explore President-elect Biden’s proposals that could have an impact on your student loans in the years to come.
New Income-Driven Repayment Program
Biden has proposed a new type of income-driven repayment (IDR) program that aims to simplify the current IDR structure. Only federal student loans are eligible for this type of program.
- Individuals making less than $25,000 per year will not owe payments or interest on undergraduate federal student loans.
- Individuals making more than $25,000 per year will be responsible for paying 5% of their discretionary income. After making responsible payments for 20 years, the remaining balance would be 100% forgiven.
- The forgiven balance would also be tax-free. Under the present tax code, the forgiven amount of the loan becomes taxable income in the final year of repayment (except for Public Service Loan Forgiveness).
- Enrollment would be automatic for individuals with new and existing loans. But, borrowers would have the ability to opt out.
Public Service Loan Forgiveness (PSLF)
Biden also plans to overhaul loan forgiveness for public servants. In addition to tax code changes for IDR programs (cited above), Biden proposes a simpler, up-front policy when it comes to PSLF.
- $10,000 of undergraduate or graduate student loan forgiveness for each year of public service, capped at 5 years.
- Enrollment will be automatic for qualified individuals working in schools, government and other non-profit organizations. Qualifications may also extend to 5 years of prior service.
In the current structure, forgiveness is granted after 10 years of qualifying payments (120).
Besides striving to simplify and reduce the burden to student loan borrowers in repayment, Biden has also proposed changes to make higher education more affordable. These policies include increases to Pell Grants as well as reduced or even free tuition for public colleges and universities (depending on income limits).
As you can see from the outlined policies, your student loans could experience major changes under a Biden presidency. Keep in mind, the following policies are merely proposals. For the remainder of this year, all federal student loan payments are waived as part of relief efforts enacted due to COVID-19. If you have the means, any payment you make to your federal loans is essentially worth double. Explore all of the ways you could become debt-free on FutureFuel.io, including lowering your monthly payment or crushing your student debt faster.