Since loans and debt related to students has not been at the center of recent presidential debates, the Biden presidency might bring significant changes to your student loans. Its suggested policies include the reform of existing income-driven repayment programs, an improvement in the value of Pell Grants, the provision of reduced or free school fees, and an improvement in student loan forgiveness options.
Here’s who’s going to pay attention to the new policies, how they relate to President Trump ‘s proposals, and what your student loan debt could mean.
Revised revenue-driven repayment plans
If you already have or are planning to have a student loan debt, plans for a new income-driven repayment plan made by the Biden team are likely to have an effect on you, says Steve Muszynski, founder and CEO of Splash Financial. Here’s what Biden has in mind for the latest revenue-driven repayment plan:
Anybody who makes more than $25,000 would pay 5% of their discretionary income. After 20 years of making responsible contributions, 100% of the loans would have been forgiven.
Anyone who makes less than $25,000 will not be responsible for any fees or interest on undergraduate federal student loans.
Borrowers with current or new student loan debt will be automatically registered in the income-based repayment program, with the option to unenroll if they so desired.
Biden wants to amend the tax code so that the debt forgiven under the revenue-driven repayment scheme will not be charged.
All undergraduate students will be eligible for a revised payment package.
On the other hand, President Trump wanted to combine the four current income-driven repayment programs into one, with each payment based on 12.5 per cent of the borrower’s disposable income. Biden will make a proposal that shall allow debtors with student loan debt to be excused for undergraduate loans for 15 years and for graduation loans for 30 years.
Usually, income-driven repayment programs are based on 10 to 20 per cent of your discretionary income, with pardon after 20 to 25 years.
Free or discounted college education
Here’s what might happen to your higher education if Biden is voted into office:
So if you and your family earn less than $125,000 a year, you will be free to study at any public college or university for four years.
If you attend community college, the first two years will be free of charge.
This proposal would be a federal-state arrangement, with 75% of the expense going to the federal government. The Member States will contribute to the remaining balance.
Trump does not seem to have a strategy to minimize or reduce the cost of education.
Forgiveness in Loans
Muszynski says it’s “very unlikely” that we’ll see a big student loan waiver under Biden’s presidency. Since Biden is more on the moderate side, any kind of forgiveness will be for the people who need it most.
If you engage in a national or community service, Biden has offered a grant that will raise $10,000 of your student loan debt for up to five years each year. If you work in a classroom, hold a government job or work in the non-profit sector, this proposal will immediately apply to your debt.
Biden’s plans include allowing student borrowers to cancel their loan debt after they have declared bankruptcy.
Trump’s 2021 budget aims to get rid of the Public Service Loan Repayment Scheme, which promised the cancelation of student loan debt after 120 installments for non-profit, public service and government workers, but which was criticized for its ambiguity.
Increase in Pell Grant
“[With Biden’s presidency] you would see a focus on lower education costs, and you would see that through increased government funding through Pell Grants,” says Muszynski. Biden’s Pell Grant plans are targeted at reducing the amount of debt with which students leave school.
- Biden plans to double the value of Pell Grants.
He wants to encourage the Pell Grant recipients, those with state assistance and those with other forms of aid, to use the funds to offset the cost of education above the cost of education.
Trump’s proposal for Pell Grants requires an enhancement of eligibility criteria – expanding eligibility for short-term students and imprisoned students.
The bottom line
Your student loan debt is inclined to look different under the Biden presidency. Bear in mind, though, that these are just proposals — they are not guaranteed. For the time being, you will take advantage of the extended federal student loan forbearance period up to Dec. 31, 2020, and any future extensions of student loan relief.