Republicans have proposed a blockbuster new student loan forgiveness scheme.
Here’s what you need to know — and what it means for your student loans.
President Joe Biden is days away from announcing his decision on a broad student loan forgiveness. Before that happened, however, Republicans in Congress introduced major legislation to change the future of student loans and student loan forgiveness. As first reported by Business Insider, Reps. Virginia Foxx (R-NC), Elise Stefanik (R-NY), and Jim Banks (R-IN) introduced the Education Aid Reforms Act responsible through loans (REAL) to offer an alternative proposal to Biden’s student loan cancellation. Here’s what’s in their student loan forgiveness plan.
Student Loan Forgiveness: The Details
Specifically, this student loan forgiveness bill would provide, among other things, the following:
- existing student borrowers enrolled in an income-driven repayment plan would only have to pay their original student loan balance plus 10 years of student loan interest;
- ending the student loan payment pause;
- ending the Civil Service Loan Forgiveness Program for new student borrowers;
- no large-scale student loan forgiveness of any amount;
- create a new single income-based reimbursement plan similar to Income-Based Reimbursement (IBR) to replace existing income-based reimbursement plans;
- eliminate student loan forgiveness through income-based repayment plans;
- ending Grad PLUS student loans, which would limit the amount that graduate student borrowers could borrow;
- final capitalization of student loan interest, which is the addition of accrued student loan interest to your student loan balance;
- helping defaulting student borrowers rehabilitate their student loans for the second time; and
- prevent the U.S. Department of Education from using the negotiated rulemaking process to issue economically significant regulations (such as over $100 million), including large-scale student loan forgiveness .
Biden could announce student loan forgiveness any day
Biden is days away from one of the biggest decisions of his presidency: whether to cancel student loans for more than 40 million student borrowers. According to leaked student loan forgiveness documents from the US Department of Education, Biden is considering $10,000 in student loan forgiveness for student borrowers. Here’s who might qualify for student loan forgiveness. Although Biden has not made a final decision, the potential announcement of Biden’s signing into law of student loan forgiveness could come days before the student loan payment pause expires on August 31, 2022. Since that he became president, Biden set aside more than $25 billion. student loans. This includes $8 billion in student loan forgiveness for nearly 150,000 public servants. Biden is working to simplify student loans. He recently delayed a new student loan plan, which could rival the Republican proposal for income-contingent student loan repayment. Biden also proposed making the limited student loan forgiveness waiver permanent, which would benefit student borrowers requesting civil service loan forgiveness. In contrast, Republicans have proposed eliminating the cancellation of public service loans. Republicans want to limit Biden’s ability to use the negotiated rulesmaking process at the Department of Education to implement significant policy changes. However, Biden wants to make major changes to student loans, including a proposed reduction in student loan interest and major changes to student loan managers.
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 Democrats in Congress want to expand access to higher education, provide more student loan forgiveness and help student borrowers find easier ways to pay off their student loans. In contrast, Republicans want to limit federal spending, prevent Biden from canceling more student loans, end costly student loan forgiveness programs and limit the president’s ability to make significant changes without the authority of Congress. If Republicans take control of Congress and the presidency, this proposal could offer a glimpse into the future of student loans. That said, student loan forgiveness is not the only issue that concerns student borrowers. The student loan payment will end in a few days. This means student borrowers should expect to resume student loan repayments as of September 1, 2022. Are you ready? Here are some of the most popular ways to pay off student loans faster and save money: