About Biden Loan Forgiveness

What is a PSLF?

Public Service Loan Forgiveness (PSLF) is a back-end student loan forgiveness program in which the borrower's unpaid federal debt is forgiven after making a certain number of monthly payments. The program forgives the remaining student loan debt after an eligible borrower makes 120 payments.

Debtors must meet all of the service requirements before receiving any loan cancellation or forgiveness. For example, a borrower must work full-time in a public service position to be eligible for PSLF. In addition, only direct federal loans, such as Direct Subsidized Loans, Unsubsidized Loans, Parent PLUS Loans, Grad PLUS Loans, and Direct Consolidation Loans, are eligible for the program. Finally, the PSLF program only works when the borrower switches to an income-driven repayment plan.

About Income-driven Repayment Plan

The average repayment time for federal student loans is ten years. However, you can enroll in an income-driven repayment (IDR) scheme if a 10-year payback period renders your monthly payments unmanageable. There's no cost to apply, and you can complete the paperwork yourself.

Payments on income-driven programs are spread out over 20 or 25 years, with fees capped at 10% to 15% of your take-home pay. After that period, presuming you've made all of your required payments, any remaining balance on loan is forgiven. After that, charges will range from 10% to 20% of your discretionary income, depending on your home income and family size.  

Biden Loan Forgiveness

As a presidential candidate, Biden stated that he wanted to eliminate student loan payments for borrowers. He wants to lower student loan payments and make them as low as 5% of monthly discretionary income. Income-driven repayment schemes are currently based on 10% of the borrower’s monthly discretionary income. If implemented, this may save millions of dollars every month for student-loan debtors.

Biden has declared publicly that he is willing to erase up to $10,000 in federal student loan debt per borrower, but recent events may open the way for the president to forgive up to five times more than that amount.

To eliminate bureaucracy and complexity, Biden wants to simplify student loan repayment. He also wants all income-driven repayment plans to have automatic enrollment. For individuals who have trouble repaying their debts, automatic enrollment could be a beneficial, hassle-free option.

Fulfilled Promises

While it's still early, Biden has yet to deliver on any of his pledges. The most that can be said is that he is beginning to think about working on them and that development will take time.

One of the president's first acts as president was to extend the payment suspension on student loans for the duration of the pandemic, offering relief to the 43 million debtors. However, the halt will end in October, and borrowers, experts, and lawmakers are concerned that the Biden administration will not do enough to protect borrowers.

In May, Joe Biden requested that the US Department of Education examine student loan forgiveness and repayment to see what adjustments, if any, could enhance student loan borrowers' outcomes. The Education Department will hold public hearings later this month to gather public input on the future of student loan forgiveness.

[ Updated on 14-Oct-2021, 23:12 ]