Democrats Propose 5 Changes To Student Loan Cancellation

Joe Biden, the Vice President of the United States (Photo courtesy of Getty Images/David Lienemann/The White House)
courtesy of Getty Images
Five improvements to student loan cancellation have been proposed by Democrats in Congress.
Here’s what you should know about it, as well as what it implications for your student loans.
A coalition of progressive Democrats, including Senate Majority Leader Chuck Schumer (D-NY) and Sen. Elizabeth Warren (D-MA), advocated five reforms to student loan repayment and cancellation in a letter to U.S. Secretary of Education Miguel Cardona. The following are their five primary proposals:
Millions of student loan debtors benefit from income-driven repayment arrangements, but they are overly complicated. Instead than having various income-driven repayment plans that can be confusing for student loan borrowers, the Education Department should create a single income-driven repayment plan that is available to all present and future student loan borrowers. Student loan payments for federal student loans would be capped at no more than 10% of discretionary income; student loan payments for no more than 20 years; student loan forgiveness after 20 years; student loan borrowers should be able to “prioritize their living expenses” ahead of student loan payments; and student loan interest should not accumulate under the new student loan repayment plan.

ADDITIONAL INFORMATION FOR YOU
Members of Congress believe it should be simpler for student loan borrowers who have been scammed by their schools, notably predatory for-profit colleges, to get their loans cancelled. They claim that during Trump’s administration, the bar for borrowers to prove their universities injured them got more onerous, making it more difficult to secure student debt cancellation. Instead, they’d like to see the following:
establish a uniform, fair, and equitable borrower defense rule that applies to all current, future, and former federal student loan borrowers; full student loan cancellation should be the rule, not the exception; any federal student loan borrower who was a victim of “unlawful, unfair, deceptive, or abusive practices in higher education” should be eligible for student loan cancellation;

It can be heartbreaking for students pursuing a degree when a college closes unexpectedly. The following is what the Democrats want:
When a college closes, give federal student loans an automatic cancellation; student loan cancellation without the need to apply; remove the restriction that prevents student loan cancellation if you transfer to another college; automatic student loan cancellation within 90 days of the college closing; student loan cancellation should happen quickly so that student loan borrowers can get back on their feet.

Democrats want to make it easier for student loan debtors with disabilities to get their loans forgiven. They propose, for example, removing the requirement to submit an application for federal student loan cancellation; removing the requirement of a “monitoring period” of potential earnings; student loan discharge should occur within 90 days of receiving notice from the United States Department of Veterans Affairs or the United States Social Security Administration; and changing the definition of “total and permanent”

The signatories demand changes to the Public Service Loan Forgiveness program, including: advance student loan payments and lump-sum student loan payments should be counted as qualifying student loan payments for student loan forgiveness; the Employment Certification and student loan forgiveness forms should be merged into a single form; and when student loan borrowers cosign for their loans, they should be given priority.
borrowers who have been approved for qualifying student loan payments should not be penalized if the error was made by a student loan servicer or the US Department of Education; create a clear appeals process for any student loan borrower who is denied for student loan forgiveness; and institute more data sharing agreements.

Since becoming president, Biden has cancelled $3 billion in student loans. For starters, Biden eliminated $1 billion in student loan debt for 72,000 debtors. Second, Biden annulled another $1.3 billion in student loans for 41,000 borrowers who have been declared totally and permanently disabled. Finally, Biden provided student debt relief to 1.1 million individuals who had defaulted on their FFELP loans. Fourth, Biden used the borrower defense to student loan payback regulation to cancel $500 million in student loan debt for 18,000 borrowers. Many of the initiatives detailed in this letter are expected to receive Biden’s approval. The Education Department, on the other hand, would be favorable to the majority of these recommendations. The overall goal is to increase the number of people who are eligible for student debt forgiveness and to eliminate discriminatory criteria that prevent students from canceling their loans. Many of these recommendations are aimed at decreasing bureaucracy and unfair practices that borrowers of student loans are subjected to. Some are fast fixes, while others, like defining what a single income-driven repayment plan would look like, may take longer. However, the Education Department is likely to take all of these ideas seriously and adopt many of them.
You may not be eligible for student loan forgiveness even if any of these regulations are implemented. That is why it is critical to be aware of all of your options for student loan payments. Here are some common money-saving options:

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