Student Loan Forgiveness: New Blockbuster Plan To Cancel Student Loans

Republicans have proposed a blockbuster new plan for student loan forgiveness.

Here’s what you need to know — and what it means for your student loans.

Student Loans

President Joe Biden is days away from announcing his decision on broad student loan forgiveness. Before that happens, however, Republicans in Congress have 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 Responsible Education Assistance Through Loan (REAL) Reforms Act to offer an alternative proposal to Biden’s student loan forgiveness. Here’s what’s inside their plan for student loan forgiveness.

Student loan forgiveness: the details

Specifically, this proposed legislation on student loan forgiveness would provide for the following, among other proposals:

• existing student loan 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;
• end the student loan payment pause;
• end the Public Service Loan Forgiveness program for new student loan borrowers;
• no wide-scale student loan forgiveness of any amount;
• create a new, single income-driven repayment plan similar to Income-Based Repayment (IBR) to replace existing income-driven repayment plans;
• eliminate student loan forgiveness through income-driven repayment plans;
• end Grad PLUS student loans, which would limit how much graduate student loan borrowers could borrow;
• end capitalization of student loan interest, which is the addition of accrued student loan interest to your student loan balance;
• help student loan borrowers in student loan default to rehabilitate their student loans for a second time; and
• prevent the U.S. Department of Education from using the negotiated rulemaking process to issue regulations that are economically significant (such as more than $100 million), including wide-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 loan borrowers. According to leaked documents on student loan cancellation from the U.S. Department of Education, Biden is considering $10,000 of student loan forgiveness for student loan borrowers. Here’s who could qualify for student loan forgiveness. While Biden hasn’t made a final decision, the potential announcement of whether Biden will enact student loan forgiveness could come days before the expiration of the student loan payment pause on August 31, 2022. Since becoming president, Biden has canceled more than $25 billion of student loans. This includes $8 billion of student loan forgiveness for nearly 150,000 public servants. Biden is working to simplify student loans. He recently delayed a new plan for student loans, which could rival the Republican proposal for income-driven student loan repayment. Biden also proposed to make the limited waiver for student loan forgiveness permanent, which would benefit student loan borrowers seeking public service loan forgiveness. In contrast, Republicans proposed to eliminate public service loan forgiveness. Republicans want to limit Biden’s ability to use the negotiated rulemaking process at the Education Department to implement significant policy changes. However, Biden wants to execute major changes to student loans, including a proposal to lower interest on student loans and major changes to student loan servicers.

Student loans: next steps

While this proposed legislation likely won’t 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 loan borrowers find simpler ways to pay off student loans. In contrast, Republicans want to limit federal spending, prevent Biden from canceling more student loans, end high-cost programs for student loan forgiveness, and limit the president’s ability to make significant changes without congressional authority. If Republicans win control of Congress and the presidency, this proposal could offer a glimpse into the future of student loans. That said, student loan forgiveness isn’t the only issue that is top of mind for student loan borrowers. The student loan payment will end within days. That means student loan borrowers should expect to restart student loan payments beginning on September 1, 2022. Are you prepared? Here are some of the most popular ways to pay off student loans faster and save money:

• Student loan refinancing (lower interest rate + lower payment)
• Income-driven repayment (lower payment)
• Student loan forgiveness (federal student loans)

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