It appears that President-elect Joe Biden is planning to enact legislation that many democrats have been pushing for in recent years: student loan forgiveness. This could be huge news for anyone still paying off student loans, who stand to see financial relief as a result.
While Biden’s loan forgiveness plan is still not completely clear, the proposal is reported to look something like this:
- Pausing Federal Student Loan Payments: Continuing the year-long pause on federal student loan payments.
- Federal Student Loan Debt: All such debts up to $10,000 to be cancelled for eligible borrowers.
- Income-Based Repayment: Those earning less than $25,000 per year are not required to make any loan payments on undergraduate federal loans. Borrowers earning above this income level must pay 5% of their discretionary income toward the loan balance, which is forgiven completely after 20-years.
Based on the information already released by the incoming Biden administration, and the questions that still remain, here is our guidance for those currently carrying student loan debt:
- Student Loan Debt in excess of $50,000: Pay down the debt to $50,000, which is the highest forgiveness proposal under consideration, but wait until further guidance is issued on the bill.
- Student Loan Debt from $1-$50,000: Halt paying off this debt until the administration becomes clearer on if forgiveness will be granted. Since interest is not accruing, this does not adversely affect you in the event this bill is not passed.
- Currently No Student Loan Debt: Consider contacting your financial aid department today and applying for a federal loan. If debt forgiveness is granted, this would be free money to apply towards education.