Student loans are a very common problem in the US today. Some students graduate with huge debt, and they can’t find jobs that will allow them to pay off these debts. There are many different solutions to this problem, but one that has recently been proposed by Joe Biden is student loan forgiveness for borrowers who work in the public sector.
What is the student loan forgiveness program and what does it entail?
The student loan forgiveness program is an initiative that would pay off part of the loans of borrowers who work in public service jobs. This could be for government agencies, local/state governments, or non-profit organizations. Biden’s proposal was to offer up to $17500 worth of debt relief per year after five years on the job and 15000 total hours worked with this organization. The plan might help as much as 25 million Americans out!
It sounds like a great idea at first until you realize how little money it actually offers anyone compared to what they owe and how few people will really qualify for it. One problem is that it only applies towards your direct education expenses such as tuition fees and not other living costs associated with going back to school. Also, the money is not awarded until after five years of employment with this organization so someone could be stuck for up to ten years before they are eligible!
The proposed legislation would have helped people who work in public service jobs by offering student loan forgiveness but it was quickly scrapped because there were concerns that an estimated $100 billion cost cannot be justified right now when many more important issues like health care and immigration reform take precedence on Capitol Hill., etc.
When did Biden’s student loan relief take effect?
The student loan relief took effect in October 2017. This is a part of the “Student Loan Forgiveness Act” that was proposed by Biden and signed under the Obama Administration.
When Biden introduced this bill, he said it would help out borrowers who are paying for their college loans after they have graduated from colleges or universities. At present times when people consider going to school but cannot afford tuition fees because of certain financial conditions such as unemployment, low-income job, etc., then taking up an education becomes a hard task with the burden of debt already on your shoulder.
To make things easier for students like these, initiatives were taken through different processes including this one – Student Loan Forgiveness Act which was passed in 2010 during Obama’s term in office.
Why do you need to pay attention to them?
Since this is a part of Biden’s student loan forgiveness and it will be taking effect in October 2017, you should start paying attention to what all benefits do you get from these.
For example: if your income falls below the threshold level ($1613 per month) then you can avail of Income-based repayment (IBR). You pay 15% of your discretionary earnings towards the IBR plan which means that even if after 20 years, when your loans are forgiven (provided they still exist), there won’t be any tax consequence involved because “your balance has been zeroed out”.
This initiative taken by Obama Administration was great news for many students who have graduated during the last two decades but have not yet started earning well enough to manage their monthly loan repayments.
Also, as per the latest news that came from Biden’s camp – there will be a new income-based repayment plan called “Pay As You Earn” (PAYE) which is going to benefit those borrowers who have taken loans after October 2007 and their outstanding balance amounts around $30k or more.
There will be a little bit of variation in this compared with IBR because you need not prove your family size while applying for PAYE but it has got an upper cap on the monthly payments limit ($245). This means that if by any chance you manage to pay off all your loans before 20 years then also no tax consequence involved.
Who qualifies for this relief, how do they qualify, and what are the qualifications?
According to the new initiative, anyone who is above 18 years and has taken a student loan after October 2007 will be eligible for this relief. The monthly pay-off amount should not exceed $245 or else you’ll have to switch back from the PAYE option to IBR.
In order to qualify under Biden’s student loan repayment plan, you have to be married for at least two years by December 31st following your final year in college. If someone qualifies then they will end up having any remaining balance forgiven after making 120 consecutive monthly payments that need to be made while working full-time with the federal government (or non-profit) organization that is contracted with this plan.
The qualification period lasts for 20 years and you can only qualify once so if someone has to, they will have the option of either making 120 monthly payments or else it would be an amount equal to what is remaining on their loan balance after two decades (that’s why I say that frequently borrowers end up paying more over the course of this repayment plan).
This plan can save nearly $5000 annually in total repayments so it’s a great way of “relief” if we get into details about that! If by any chance your income falls below the threshold then you get all the benefits (like mentioned earlier) like tax exemption on forgiven loans, etc. So why wait? Go ahead and apply now before Biden leaves office next year!!
How much money can be saved with this program?
Well, a borrower can save up to $25,000 with this program. This is the main reason that borrowers are interested in this program. The debt consolidation assistance will help them manage their debt easier than ever before. Even though they are not required to make any payments, there is a grace period.
The borrowers will have 18 months in order to consolidate their loans without making additional payments at all. The payment amount may be reduced if it is lower than what you owe currently on your student loan debt. There are benefits for those who decide this program can help them save money with their monthly bills and how much of it each month!
What are the pros and cons of student loan forgiveness?
Pros
The pros of student loan forgiveness are that it can be an opportunity for people to get out from under debt. If you have enough income, after this is done, then the amount paid back will be more manageable.
If your interest rate has gone up on the loans (which often happens when borrowers enter delinquency), getting rid of them may lower payments in future years and also reduce how much they owe overall.
Finally, many graduates who do not qualify for public service loan forgiveness or another program still benefit because their creditors agree to end collection activity while participants make qualifying monthly payments toward a new agreement with different terms.
When someone gets approved by one agency but not another before being able to complete all 120 eligible months, borrower’s loans are often turned over to FedLoan Servicing for the remaining months.
Cons
Student loan forgiveness can be a trap. Unless you research your options, if your income happens to drop after working out an affordable repayment plan with the original lender, choosing public service loan forgiveness may make matters worse rather than better down the road because now payments will go toward balances instead of interest due to consolidation loans which means next time around borrowers will have less forgiven just when their earnings are lower and they need assistance more.
Also, there’s no guarantee that any agency or creditor would agree on new terms even if they do help one borrower in this situation by suspending collection activity until employment improves. If someone chooses PSLF and they are denied (or if the agency who approved them fails to switch their loans over, which is what happened in some cases), borrowers may end up with a balance due on an account that was suspended rather than one where payments were made toward interest.
If this happens without understanding why it’s happening and whether you can successfully appeal the decision then your credit score will take another hit because of collections activity after all attempts at working out payment arrangements with the original lender failed. This means not only do borrowers have more debt but also higher interest rates going forward well.
What are the types of student loans?
Public service loan forgiveness
This is a program that is offered for student loan borrowers. This can be very beneficial whether or not you are someone who has been having issues with your current payment plans. By checking out this information, it may allow people to make an informed decision about whether or not they want to pursue one of these types of programs themselves!
In order for a borrower to qualify under Biden’s student loan repayment plan, they have to be married for at least two years by December 31st following their final year in college.
If someone qualifies then they will end up having any remaining balance forgiven after making 120 consecutive monthly payments that need to be made while working full-time with the federal government (or non-profit) organization that is willing to forgive them. It is important for students to check out all of the requirements before making a decision!
This type of loan forgiveness program was introduced in 2007 by the U.S Department of Education and Congress that allowed borrowers to have some or all of their federal student loans forgiven after working for a certain amount of time with non-profit and government organizations.
Borrowers should be aware that Public Service Loan Forgiveness (PSLF) is only available for federal student loans such as Direct Loans, Federal Family Education Loans, or Perkins loans after they have made 120 consecutive monthly payments while working full-time in an eligible organization.
Federal Student Loans
Federal student loans are available for students who want to pursue further education. These types of loans can be used in order to pay the cost that is associated with higher learning institutions and even continuing education programs, depending on one’s current situation!
Instead of considering a private student loan, first, consider federal loans as they typically come with lower interest rates and more flexible repayment plans. Federal loans can help those who are struggling financially to enroll in college or another post-secondary school as well as keep the payments down.
Federal student loan debt is a serious issue for many people. Instead of taking out a private loan, first, consider your federal options as they typically come with lower interest rates and more flexible repayment plans. Federal loans help those who are struggling financially to enroll in college or another post-secondary school as well as keep the payments down.
The best thing about these types of programs is that they can make financial sense for borrowers because doing so will allow them to save money later on when making their monthly repayments!
What are the things that borrowers should be aware of?
- Lower monthly payments
- A variety of repayment options such as income-based plans graduated repayment plans, extended payment plans not just standard ones.
- No prepayment penalties.
- Loan forgiveness after a certain amount of time, such as 20 or 25 years depending on the plan that you choose
How can this help?
This type of program is a great option for those who are struggling to make their monthly student loan repayments due to low income or unusual circumstances. The best thing about this plan is that it offers forgiveness after working full-time in an eligible organization, as well as the fact that borrowers will not have any remaining loans after their repayment plan is complete. This type of program can be extremely beneficial for those who are struggling financially, especially since they do not have to pay anything back in the end!
How will it affect students in the future?
This program is targeted at students who are struggling financially and it will hopefully help them to be able to attend college or another post-secondary school. If this type of program did not exist, then many people may have never been able to pursue their dreams because they could not afford an education without taking out a private student loan which comes with high-interest rates and more severe repayment terms.
In conclusion:
This type of program is a great option for those who are struggling to make their monthly student loan repayments and it will hopefully help them to be able to attend college or another post-secondary school. If this type of plan did not exist, then many people may have never been able to pursue their dreams because they could not afford an education without taking out a private student loan which comes with high-interest rates and more severe repayment terms. EdFed offers Student Loan programs to help borrowers with repayment programs. Feel free to contact one of us today for more information.
