Republicans have proposed ending student loan forgiveness for millions of student borrowers.
Here’s what you need to know – and what it means for your student loans.
A new blockbuster student loan proposal by Republicans in Congress would eliminate one of the most popular student loan forgiveness programs: public service loan forgiveness. A new bill by Reps Virginia Foxx (R-NC), Elise Stefanik (R-NY) and Jim Banks (R-IN) would end the troubled student loan cancellation program.
According to their proposed legislation:
- the civil service loan forgiveness program would be abolished;
- Student loan borrowers currently seeking government loan forgiveness would be protected; and
- this student loan waiver would expire after July 1, 2023.
End of government loan forgiveness
It’s not the first time Republicans have proposed ending government loan forgiveness. For example, Republicans say Biden has foregone $400 billion in student loans and there should be no more student loan forgiveness, especially a one-off, large-scale student loan foreclosure. In his annual budget, President Donald Trump proposed ending government-sector loan forgiveness amid other cuts to the US Department of Education and recommendations to modify student loans. Congress created the Public Service Loan Forgiveness program in 2007, which allows borrowers to foreclose on their government student loans if they meet certain requirements. For example, student loan borrowers must be employed full-time (at least 30 hours per week) with a qualifying government or nonprofit employer and make at least 120 monthly student loan payments. The program has struggled for years with borrower rejection rates of up to 99%. However, Biden proposed significant changes to student loans to allow more student borrowers to qualify for student loan forgiveness. For example, Biden canceled $8 billion in student loans for public employees. Biden has also instituted a limited student loan forgiveness waiver, which allows student loan borrowers to “count” past student loan payments that were previously ineligible for student loan forgiveness. Last month, Biden proposed extending that limited student loan forgiveness waiver beyond Oct. 31, when it expires. He also delayed announcing a new student loan repayment plan. However, Biden could soon introduce a simplified income-based repayment plan.
Student Loan Forgiveness: Why End Student Loan Forgiveness?
Biden and some Republicans in Congress are at odds over the future of student loan forgiveness. Proponents of public service loan forgiveness recognize that the program needs to be corrected. However, they believe the program will provide significant student loan relief for police officers, firefighters, military personnel, teachers, nurses and other public employees. Democrats also recognize that ending student loan forgiveness for civil servants could discourage student loan borrowers from pursuing careers in the public sector and nonprofit organizations. Republicans who oppose student loan forgiveness want the federal government to save billions of dollars. They believe that forgiving student loans is an unfair redistribution of wealth that benefits high-income people and hurts Americans who haven’t attended college or don’t have student loans. With Democrats controlling Congress and the White House, this proposed legislation is unlikely to become law anytime soon. However, other components of the proposed bill, such as eliminating capitalized student loan interest, could be included in broader student loan reform.
Student loans: next steps
Biden faces three key student loan deadlines. In the coming days, Biden said he will decide whether to issue a sweeping student loan forgiveness. This decision is separate from government loan forgiveness, a separate federal program. Biden could also address the future of student loans with additional student loan changes and student loan repayments. The disbursement of the student loan ends within a few days. That means student loan borrowers should be ready to resume student loan payments on September 1. Here are some of the best ways to pay off student loans and save money: