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Student loan forgiveness gets a major overhaul, but here are 3 things missing

The cancellation of the student loan is subject to a major overhaul, but here are 3 things that are missing.

Here’s what you need to know.

Student loans

President Joe Biden granted more student loan cancellations today thanks to a major overhaul of the civil service loan cancellation program. The US Department of Education, headed by Secretary Miguel Cardona, has announced sweeping changes to student loan cancellation to correct a program that has been plagued by a 98% rejection rate. The announcement comes after public hearings, comments and backlash from student loan borrowers and advocates who say teachers, police, firefighters, first responders, members of the military, doctors, nurses, lawyers and other noble officials have been denied cancellation of their student loans, even though they believe they have met the requirements. Major changes announced today include, among others:

  • Include all federal student loan payments made regardless of the type of student loan (such as FFELP loans);
  • Include all federal student loan payments made regardless of the student loan repayment plan;
  • Count more types of student loan payments for student loan cancellation, such as those made with the wrong student loan payment amount;
  • Count months spent on active duty for military service members, even if student loans were past due or deferred; and
  • Establish a process to review refused student loan cancellation requests and correct errors.

Student loan cancellation: what it means

Since becoming president, Biden has canceled nearly $ 10 billion in student loans. This includes $ 1.5 billion in canceled student loans and $ 5.8 billion in canceled student loans for student loan borrowers with total and permanent disabilities. (Find out here how to apply for a student loan forgiveness). Today’s announcement – which is separate from this other student loan cancellation – continues its commitment to reshaping the future of student loans by securing a federal program created by Congress in 2007. One of the key issues involved To student loan cancellation is which student loan borrowers qualify and which student loan payments qualify. For example, with large-scale student loan forgiveness proposals, these student loan borrowers will not be eligible for a student loan forgiveness. Some praise the Biden administration and applaud the changes, saying they will help hundreds of thousands of student loan borrowers. Others say the cancellation of civil service loans has been on hold for years and that these changes are long overdue. No matter where you are, the Biden administration has responded to fix a program that has struggled to deliver on its promise to cancel student loans for public servants. That said, today’s announcement will not solve all the problems associated with the cancellation of civil service loans. Here are 3 things missing from today’s announcement that could help more student loan borrowers:

1. Make the cancellation of the student loan automatic after 10 years

The purpose of civil service loan cancellation is to cancel student loans for student loan borrowers who dedicate their careers to the advancement of the public good. One proposal missing from today’s announcement is the automatic cancellation of student loans after 10 years of public service. This could eliminate the complex bureaucracy, paperwork, tallying of payments, and other details that have kept student loan borrowers from getting their student loan forgiveness. Currently, in order to get a civil service loan forgiveness, student loan borrowers must make 120 monthly student loan payments on time and in full. The argument against “automatic student loan cancellation” after 10 years of service is that it cancels monthly student loan payments or enrollment in an income-based repayment plan, for example.

2. Offer a student loan discount after 5 years

Student loan forgiveness for utility loan forgiveness requires 120 monthly student loan payments, or 10 years. If you work for nine years, for example, make 108 of the 120 monthly payments, then stop working for a qualified public service employer, you’ll get $ 0 student loan forgiveness. As a presidential candidate, Biden offered the option of granting a student loan forgiveness after five years. (Biden is ready to sign student loan cancellation, but Congress hasn’t passed any laws). Under Candidate Biden’s plan, a student loan borrower could get $ 10,000 a year in student loan forgiveness for five years, or $ 50,000 in student loan forgiveness. This proposal could offer a student loan discount to borrowers who are unable to serve for a full 10 years. The argument against this proposal is that it could limit the amount of student loan exemption, which may be argued by some, but would not be popular with student loan borrowers.

3. Grant a partial forgiveness of the student loan

Student loan forgiveness is all or nothing: you either meet the requirements of the Public Service Loan forgiveness or you do not. Unlike student loan forgiveness as part of the borrower’s defense to repayment (which has partial student loan forgiveness), utility loan forgiveness is just a total student loan cancellation. Another option is to offer partial student loan exemption to public servants who serve less than 10 years. For example, like Biden’s proposal, a student loan borrower could get an annual student loan forgiveness for each year of work for a qualified public service or nonprofit employer for up to 10 years of employment. service. This could provide more flexibility and encourage more student loan borrowers to work in the public service. The counter-argument is that the original intention of the program was to attract student loan borrowers who would make a long-term commitment to serve, and this could defeat that goal.

Student loans: final thoughts

The changes announced today by the Department of Education are expected to help more student loan borrowers get their student loan forgiven. Student loan borrowers have until October 31, 2022 to take advantage of the government loan forgiveness waiver to account for past payments, regardless of student loan type or student loan repayment plan. The Department of Education is also working to make student loan managers more accountable, including contracting a new student loan manager to cancel civil service loans. (Navient will terminate his contract as a student loan manager). It is important to note that today’s announcement is not about a large-scale student loan forgiveness or an income-related payback student loan forgiveness. These changes only apply to the cancellation of civil service loans. That said, these changes show that the Department of Education is open to a policy change to help more student loan borrowers. These changes also have no impact on the resumption of student loan payments on February 1, 2022. With the end of the temporary forbearance for student loans, make sure you understand all of your loan repayment options. student loans. Here are some popular ways to save money with your student loans:

Student loans: related reading

Student loan cancellation will not be available to these borrowers

Major changes to student loan forgiveness could come this week

How to get a student loan forgiveness

Why Navient waived your student loans

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