Republicans have proposed a blockbuster New Student Loan Forgiveness Plan.
Here’s what you need to know – and what it means for your student loans.
President Joe Biden is just days away from announcing his decision on a sweeping student loan forgiveness. Before that happens, however, Republicans in Congress introduced important legislation to change the future of student loans and student loan forgiveness. As first reported by Business Insider, Rep. Virginia Foxx (R-NC), Elise Stefanik (R-NY) and Jim Banks (R-IN) introduced the Responsible Education Assistance Through Loan (REAL) reform bill to create an alternative Proposal to submit Biden’s student loan forgiveness. Here’s what’s in her student loan forgiveness plan.
Student loan forgiveness: the details
Specifically, this Student Loan Forgiveness Bill would provide, among other things:
- Existing student loan borrowers enrolled in an income-based repayment plan would only need to pay their original student loan balance plus 10 years of student loan interest;
- ending the pause in student loan payments;
- end the government loan forgiveness program for new student loan loans;
- no large-scale student loan forgiveness of any amount;
- Create a new, single income-related repayment plan similar to income-related repayment (IBR) to replace existing income-related repayment plans;
- eliminate student loan forgiveness through income-based repayment plans;
- completion of Grad PLUS student loans, which would limit how much graduate borrowers could borrow;
- Final Capitalization of Student Loan Interest, which is the addition of accrued Student Loan Interest to your Student Loan Balance;
- to help defaulting student loan borrowers to rehabilitate their student loans a second time; and
- Prevent the US Department of Education from using the negotiated rulemaking process to enact regulations that are economically significant (eg, more than $100 million), including large-scale student loan forgiveness.
Biden could announce student loan forgiveness any day
Biden is just days away from one of the biggest decisions of his presidency: whether to call in student loans for more than 40 million student borrowers. According to leaked U.S. Department of Education student loan cancellation documents, Biden is considering a $10,000 waiver for student loan borrowers. Here’s who might qualify for student loan forgiveness. While Biden has yet to make a final decision, the potential announcement of whether Biden will waive student loan forgiveness could come days before the August 31, 2022 student loan payment pause expires. Since becoming president, Biden has canceled more than $25 billion in student loans. That includes $8 billion in student loan forgiveness for nearly 150,000 government employees. Biden is working to simplify student loans. He recently delayed a new student loan plan that could compete with the Republican proposal for income-based student loan repayments. Biden also proposed making the limited student loan forgiveness waiver permanent, which would benefit student loan borrowers seeking government loan forgiveness. In contrast, Republicans proposed abolishing government loan forgiveness. Republicans want to limit Biden’s ability to use the negotiated rulemaking process at the Department of Education to implement significant policy changes. However, Biden wants to make major changes to student loans, including a proposal to lower student loan rates and significant changes to student loan servicers.
Student loans: next steps
Although this bill is unlikely to pass Congress, the proposal raises important questions about the future of student loans. Biden and Congressional Democrats want to expand access to higher education, provide more student loan forgiveness, and help student loan borrowers find easier ways to pay off student loans. In contrast, Republicans want to limit federal spending, prevent Biden from calling in more student loans, end expensive student-loan forgiveness programs, and limit the president’s ability to make significant changes without congressional approval. If Republicans gain control of Congress and the presidency, this proposal could offer a glimpse into the future of student loans. However, student loan forgiveness is not the only issue at the forefront of student loan borrowers. The student loan payment ends within a few days. That means student loan borrowers should expect to resume student loan payments beginning September 1, 2022. Are you prepared? Here are some of the most popular ways to pay off student loans faster and save money: