Education Dept. speeds up student loan debt cancellation plan
The Biden Administration Expands Student Loan Forgiveness Plan
The Biden administration has announced an exciting expansion and acceleration of its income-driven student loan forgiveness plan. Under the Saving on a Valuable Education (SAVE) Plan, borrowers who originally took out loans of $12,000 or less and have made at least 10 years of payments will be eligible for debt cancellation as early as next month.
“Beyond being the most affordable student loan repayment plan ever available, the Biden-Harris Administration designed the SAVE Plan to put community college students and other low-balance borrowers on a faster track to debt forgiveness than ever before,”
Education Secretary Miguel Cardona stated in a press release. The plan aims to provide lower monthly payments, protection from high interest rates, and faster timelines to debt forgiveness. It not only benefits current borrowers but also offers a more affordable pathway to college degrees and credentials for future students.
The Biden administration is rolling out this new benefit months ahead of its original start date, which was July 1. In addition to the $12,000, 10-year payment limit for immediate cancellation, the plan allows borrowers to receive the benefit after one year of additional payments per $1,000 borrowed above $12,000.
For example, if someone borrowed $13,000, they would need to make a minimum of 11 years of payments before having the remainder of their debt erased. The offer is based on the original loan principal, not the current debt amount.
The Department of Education believes that the SAVE Plan will make 85% of community college borrowers “debt-free within 10 years.” This group of relatively low-debt borrowers also includes a significant portion of students who left college without obtaining a degree, according to Department Undersecretary James Kvaal.
To ensure widespread awareness and enrollment in the program, the Education Department has launched an outreach program. They will be emailing borrowers to encourage them to sign up for the SAVE Plan and will collaborate with third parties to boost enrollment. Borrowers who are already using the program and meet the eligibility requirements will have their loans automatically discharged.
Currently, the SAVE Plan has 6.9 million enrolled borrowers, and the department expects to have more information on the new beneficiaries in the coming weeks.
President Joe Biden expressed his support for the plan, stating, “This action will particularly help community college borrowers, low-income borrowers, and those struggling to repay their loans. And it’s part of our ongoing efforts to act as quickly as possible to give more borrowers breathing room so they can get out from under the burden of student loan debt, move on with their lives, and pursue their dreams.”
The SAVE Plan replaced the original Revised Pay As You Earn plan in August. The income-driven schemes were introduced after the Supreme Court struck down the original debt cancellation plan, which aimed to eliminate $400 billion in student loans all at once.
Critics of the Biden administration view these new plans as a way to shift the burden of student loan payments onto taxpayers who did not attend college.
Click here to read more from The Washington Examiner.
How does the expansion of the SAVE Plan aim to alleviate the financial burden faced by individuals with lower loan balances?
He current balance, meaning that even if a borrower has made additional payments and reduced their balance, they can still qualify for debt cancellation based on the original loan amount.
The expansion of the SAVE Plan is part of the Biden administration’s efforts to make higher education more accessible and affordable for all Americans. By providing relief to borrowers with lower loan balances, the plan recognizes the financial burden that these individuals may face and aims to alleviate their debt more quickly.
Furthermore, the expansion of the plan is expected to have a positive impact on community college students, who often have lower loan balances compared to students at four-year institutions. By offering a faster pathway to debt forgiveness, the administration seeks to encourage more individuals to pursue educational opportunities at community colleges and other affordable institutions.
In addition to the SAVE Plan, the Biden administration has also proposed other measures to address the student loan crisis in the United States. This includes expanding public service loan forgiveness and simplifying income-driven repayment plans. These efforts reflect the administration’s commitment to tackling the student debt issue comprehensively and providing relief to millions of borrowers.
While the expansion of the SAVE Plan is undoubtedly a step in the right direction, some critics argue that it does not go far enough. They believe that student loan debt is a systemic issue that requires more extensive reforms, such as widespread debt cancellation or tuition-free college. These individuals argue that the burden of student loan debt hinders economic growth and mobility for many Americans and call for more radical solutions to address the problem.
Nevertheless, the expansion of the income-driven student loan forgiveness plan under the Biden administration is significant progress towards providing relief to borrowers. By offering faster debt cancellation for low-balance borrowers, the plan acknowledges the challenges faced by these individuals and aims to create a more equitable and accessible higher education system.
As the implementation of the SAVE Plan begins in the coming months, it will be important to assess its impact and effectiveness in addressing the student loan crisis. While it may not solve the issue entirely, it is a step towards reducing the burden of student loan debt and creating a more affordable pathway to education for future generations.
Sources:
– The White House. “Fact Sheet: President Biden’s Plan to Reduce Financial Barriers to College and Support Students’ Basic Needs.” WhiteHouse.gov. Accessed October 13, 2021. https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/21/fact-sheet-president-bidens-plan-to-reduce-financial-barriers-to-college-and-support-students-basic-needs/.
– United States Department of Education. “Secretary Cardona Announces Expansion of Student Loan Repayment Relief for Borrowers with Low Balances.” ed.gov. Accessed October 13, 2021. https://www.ed.gov/news/press-releases/secretary-cardona-announces-expansion-student-loan-repayment-relief-borrowers-low-balances.
– Goodman, Jillian Berman. ”Biden administration speeds up $12,000 debt cancellation for low-balance borrowers.” MarketWatch. Accessed October 13, 2021. https://www.marketwatch.com/story/biden-administration-speeds-up-12-000-debt-cancellation-for-low-balance-borrowers-11630828317.
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