Did you know that the student loan debt in America has reached a record $1.6 trillion? For many of the forty-five million borrowers, this type of loan has sent them spiraling down a hole of seemingly unpayable debt. However, the election of Joe Biden might be a light at the end of the tunnel for these individuals.
Biden’s student loan forgiveness program has garnered quite a bit of support in recent months. So what does this mean for students in debt? In this article, we’ll be diving into the details of Joe Biden and Kamala Harris’s plan to deal with the student debt crisis in this country. Let’s get started!
Why Are Student Loans a Problem?
At first glance student loans might not seem like a problem. Often they get sold as the following: take out a loan, graduate from school, get a high paying job, then pay it off. Unfortunately, the promise of a high paying job is not a guarantee. Most graduates must still work fairly low-paying entry-level jobs before reaching a competitive salary.
When you combine this fact with extremely high-interest rates, it’s easy to see how these loans can turn into a dark shadow that stays with borrowers well after school. Student loans also derail many people’s plans for the future. For example, let’s say you want to launch a startup or small business after you graduate.
More often than not, this will require you to take on more debt through loans which can complicate your financing for the project. It’s true that resources like https://finvisor.com/ can help you avoid costly mistakes.
However, even with professional help many of these startups mired in student debt are doomed to bankruptcy. Not only do these failed ventures increase the national debt, but they also stop potential small businesses from flourishing.
Biden’s Plan With Student Loans
As the COVID continues to wreak havoc on the economy, the need for comprehensive debt relief remains crucial. Luckily, Biden’s campaign site has laid out its plans in remarkable detail.
In this section, we’ll be highlighting some of the main points that relate to borrowers. Keep in mind that these are just the areas related to student loans. Biden also plans to make other major education reforms, notably in the areas of community college and diverse college communities.
A Universal Student Loan Forgiveness Program
Biden’s universal student loan forgiveness program would relieve COVID-related economic stress in a way similar to the stimulus checks. Under it, the government would cancel $10,000 worth of debt for every student borrower.
Not only would this provide some much-needed wiggle room for those deep in debt, but it would also completely cover the debts of a third of all borrowers. Biden is not the only one behind this program. It was introduced by Elizabeth Warren and had Kamala Harris’s support since before she became his running mate.
Reduce the Amount of Student Debt to Start With
This part of the plan is ambitious, but it tackles the root of the problem with student debt instead of the symptoms. Under this policy, the college would be tuition-free for any family that makes under $125,000 per year.
While the official number is still up for discussion, this amount would cover the vast majority of working-class families that can’t afford the debt brought on by student loans. Biden also hopes to double the amount of money in the Pell Grant. The Pell Grant is a federal grant that helps lower the cost of tuition for students and families with low incomes.
Improvement of the Public Service Loan Forgiveness Program
Biden also plans to fix some of the problems that exist in the current Public Service Loan Forgiveness Program. These first of these changes involve adopting the What You Can Do For Your Country Act. This bill would add some changes to the program. Most notably, it would decrease the time it takes borrowers to get partial debt relief from ten years to five.
On top of this Biden also wants to make a simplified version for graduates working in the public service field. This plan would relieve $10,000 in debt for teachers, non-profit workers, and government employees each year for up to five years.
This plan also includes anyone who has prior service in these public service fields. These improvements are great because they help both borrowers currently suffering from debt, as well as future borrowers.
More Repayment Plans
Under the current repayment plan, borrowers can choose to pay 10% of their discretionary income. There are a few other payment options, but this is the best that people with low incomes (under $20,000 per year) can get. Biden’s plan would be much more generous for low-income individuals.
It would make it alright for people earning under $25,000 to not make any payments. On top of this, they won’t gain any interest in not making these payments. Keep in mind that these individuals would still be in debt.
As such, if borrowers begin making above $25,000, then they will need to continue paying. Biden also wants to try and forgive loans after twenty years. In addition to this, he would change tax laws so that it isn’t classified as an income.
Want More Content? Keep Exploring
We hope this article helped you learn more about Biden’s student loan forgiveness program. The new president-elect’s education plan is a breath of fresh air for many borrowers in the United States. Unfortunately, many of these reforms aren’t guaranteed. And, even if they do come to fruition, it will likely be some time before they’re put into place.
However, they do represent a positive direction for the future of student loan debt in this country. Did you enjoy this article? If the answer is yes, then you’re in the right place. Keep on reading to find more topics that you’re sure to love.