Time to Limit Student Loan Forgiveness?

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Is It Time To Limit Student Loan Cancellations?

Here’s what you need to know.

Student loans

In a new editorial, BloombergThe Editorial Board writes that student loan cancellation should be rethought: less canceled student loans, less eligible student loan borrowers and better targeting to attract public servants to where jobs are in demand. Biden announced major changes to student loan cancellation earlier this month, including $ 4.5 billion in student loan cancellation, which will help more student loan borrowers get relief from their student loan. The goal of these major changes was to fix a broken student loan exemption program that was preventing 98% of student loan borrowers from getting their promised student loan canceled. However, as the Editorial Board notes, these fixes to civil service loan cancellation are not the best way to encourage more student loan borrowers to pursue careers in the public service.


Student loan cancellation: major changes

Student loan borrowers have been turned down for public service loan forgiveness for many reasons including ineligible student loans, missing or incomplete documents, ineligible student loan payments, ineligible student loan repayment plans, and ineligible work experience, among other reasons. To correct these mistakes and allow more student loan borrowers to qualify for student loan forgiveness, Biden and the U.S. Department of Education announced the following changes, among others:

  • count student loan repayments in the student loan cancellation calculation, even if they are made before the student loan consolidation;
  • make FFELP loans and Perkins loans eligible for student loan cancellation;
  • get a student loan forgiveness even if you made student loan payments under the wrong student loan repayment plan;
  • be eligible for a student loan forgiveness even if you have made late student loan payments or incomplete student loan payments; and
  • allow active-duty members of the military to “count” payments even if they are enrolled in a student loan forbearance or student loan deferral.

(Here’s who qualifies for the student loan waiver right now). Overall, the Department of Education has relaxed the requirements for student loan borrowers to qualify for Public Service Loan Remission, which requires 120 monthly qualified student loan payments before a borrower can student loan can get their federal student loan canceled. (Here are 17 ways Biden can fix student loan cancellation). With these new changes, student loan borrowers will have one year to get “credit” on those student loan forgiveness payments. While these fixes undoubtedly help increase access to student loan cancellations, the Editorial Board recommends that the entire civil service loan cancellation be reconsidered. Here are the changes the board is proposing:


1. Unlimited student loan cancellation is a mistake

Currently, a student loan borrower who qualifies for a utility loan forgiveness can get unlimited federal student loan forgiveness. This unlimited student loan forgiveness comes after 120 monthly student loan payments, which can occur as early as 10 years. It is 10 to 15 years earlier than income-based repayment plans, which offer student loan forgiveness after 20 years (undergraduate student loans) and 25 years (graduate student loans). Compared to the public service loan cancellation, the large-scale student loan cancellation that Senator Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) is not unlimited student loan cancellation; it is capped at $ 50,000. (This could be even more important than canceling a student loan). The Editorial Board writes that unlimited student loan cancellation encourages student borrowers to enroll in expensive degree programs and does not prompt colleges and universities to cut tuition fees. With federal spending in the spotlight with Biden’s Build Back Better plan, it is possible that Congress will seek to limit student loan cancellation if Republicans take control of Congress after the midterm elections of the year. next. If limiting student loan forgiveness sounds like a Republican proposal, Biden also supported capping student loan forgiveness at $ 50,000 per year. (Biden canceled $ 11.5 billion in student loans, but here’s what that means for student loan cancellation). Biden proposed changing the civil service loan forgiveness to give civil servants $ 10,000 a year for five years, up to $ 50,000 for student loan cancellations. This is different from Biden’s plan for large-scale student loan cancellation, which would be capped at $ 10,000.


2. The exemption of student loans should be limited to civil servants

The Editorial Board argues that the cancellation of civil service loans, as the name suggests, should be limited to civil servants only. (These student loan borrowers will not be eligible for their student loan exemption). Currently, student loan borrowers who meet program requirements and work full-time for a qualified public service or non-profit employer can get student loan discount. As the Editorial Board notes, this broad definition means that student loan borrowers who work for advocacy groups, think tanks, universities, and foundations may also qualify for a public service student loan discount. . While the Editorial Board calls these professions “worthy,” the Editorial Board does not believe that these student loan borrowers should get taxpayer-funded grants like “teachers, firefighters and the military” through the government. program.


3. Cancellation of student loans should be limited to university degrees

The Editorial Board writes that civil service loan cancellation should not be available for “most graduate degrees.” The Editorial Board does not list graduate degrees that should be eligible. For example, would law degrees (prosecutors, public defenders) or medical degrees (government-employed doctors) qualify for the student loan exemption? (Student loan forgiveness is not available to everyone, but this plan is available now). Currently, a student loan borrower can get a federal student loan cancellation for college and graduate degrees. Graduate student debt comprises nearly 50% of the $ 1.7 trillion in outstanding student debt. That said, it is also possible that the editorial board intended to exclude professional degrees. There have been other recommendations to focus on college degrees for student loan cancellation and to exclude graduate degrees or professional degrees, which are associated with higher earnings. The Editorial Board notes that “eligible jobs” should “be limited to places where manpower is most in demand – such as teaching, nursing and law enforcement.” (How to get approved for a student loan forgiveness).


Student loans: next steps

While the fixes to the student loan forgiveness will help more student loan borrowers get student loan forgiveness, more changes may follow. Regardless of your position on student loan cancellation, the Editorial Board raises important questions about the future of student loans. As lawmakers and policymakers contemplate student loan cancellation, how should they balance student loan relief for student borrowers with taxpayer protection against increased federal spending? It is a philosophical question with deep practical implications. The next step for your student loans is to prepare for the end of student loan relief due to the Covid-19 pandemic on January 31, 2022. After that, you will start repaying your federal student loans with your rate again. usual interest. Don’t wait a few more months – assess all of your student loan repayment options now.

Make sure you understand these popular ways to save money with your student loans:


Student loans: related reading

Here’s who’s eligible for the student loan waiver right now

How to get approved for a student loan forgiveness

Student loan exemption will not be available for these borrowers

How to get a student loan forgiveness


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