Here are the details on the US Department of Education’s potential plan for canceling historic student loans.
Here’s what you need to know – and what it means for your student loans.
After years of waiting for student loan forgiveness, student loan borrowers got a detailed picture of the potential blockbuster student loan cancellation plan. According to leaked documents from the Department of Education, as Politico reported, millions of student loan borrowers could get more student loan waivers sooner rather than later. While the proposal is subject to change, President Joe Biden must approve any student loan forgiveness. Here are three key things that are included in this student loan cancellation plan.
1. $10,000 in student loan waiver
The plan would include $10,000 in student loan forgiveness for student loan borrowers. Since running for president, Biden has consistently supported $10,000 in student loan cancellations. Biden, however, called on Congress to cancel student loans. Since Congress hasn’t passed legislation, Biden is considering using executive branch or regulation at the U.S. Department of Education to reduce historic student loans. Progressive members of Congress, including Senator Elizabeth Warren (D-MA) and Senate Leader Chuck Schumer (D-NY), have voted in favor of $50,000 in student loan cancellations. That said, the president seems focused on $10,000 in student loans.
2. All Federal Student Loans Qualify For Student Loan Forgiveness
All federal student loans are eligible for student loan forgiveness. This is a significant change from previous student loan forgiveness. How? Previously, student loan waivers were limited to direct loans. For example, when Congress passed the historic student loan waiver in March 2020, FFELP loans and Perkins loans were not eligible for student loan forgiveness. If Biden approves this plan, FFELP Loans, Perkins Loans, Parent PLUS Loans and Grad PLUS Loans would be included in student loan forgiveness. This significant expansion of student loan waivers would benefit millions of student loan borrowers. That said, despite proposals in Congress, student loan borrowers should not expect 0% interest on their student loans. Biden also suggested cutting interest rates on student loans.
3. Income Threshold Would Limit Student Loan Forgiveness
Although not finalized, this student loan forgiveness plan includes an income threshold of $150,000 for individual student loan borrowers and $250,000 for families. You are eligible for large-scale student loan waiver if your income is below these thresholds. Student loan waivers can happen automatically if the Ministry of Education already has your income. If not, student loan borrowers can declare their income online themselves to get their student loan cancelled.
Student loans: next steps
What are the next steps when canceling student loans? Biden must approve any student loan forgiveness plan, which is subject to change. If Biden approves this plan, student loan cancellation could begin as early as 45 days. In particular, the Ministry of Education has said that no decisions have been made on student loan forgiveness and that deliberations are ongoing. Likewise, Biden said he will announce his decision on student loan forgiveness by August 31, when the student loan payment pause ends. While Biden could extend the student loan payment pause, student loan borrowers should be prepared for federal student loan payments to begin again on September 1. Here are some of the best ways to pay off student loans faster: