What Biden's Election Could Mean for Your Student Loans
NEW YORK, November 20, 2020 (Newswire.com) - Twitter is lighting up with the hashtag #CancelStudentLoans. Student loan borrowers and higher education advocates are hoping that president-elect Joe Biden can forgive $50,000 of student loans via an executive order. This would be a godsend for many, since American student loan debt has increased by more than 16% under President Donald Trump’s tenure. It is now approximately $1.68 trillion.
So what does Biden’s election actually mean for your student loan debt forgiveness?
How did #CancelStudentLoans begin?
The excitement and confusion started when Senate Minority Leader Chuck Schumer (D-NY) suggested that Biden should issue student loan forgiveness through legislation. Schumer said that he and Elizabeth Warren proposed a resolution that would forgive the first $50,000 of debt.
Proponents of the resolution note that it could increase Black and Latin household wealth, boost the economy, and close the racial wealth gap. Critics say doing so as an executive action oversteps the authority of the president.
What you need to know about the proposal
The proposal for canceling existing student debt would, among other things:
- Cancel federal student loan debt up to $50,000 (but not private student loan debt)
- Eliminate any income taxes on student loan forgiveness (some forms of debt forgiveness currently result in income taxes being applied)
- Recognize the Secretary of Education’s authority to cancel federal student loan debt
Enough already. Are my student loans forgiven or not?
Biden hasn’t actually said he would cancel such a significant amount, and didn’t say whether he would use executive action to cancel the debt. He has instead proposed $10,000 in student debt relief for every year of national or community service for undergraduate and graduate students, up to five years. Even if Biden does agree to forgive the $50k, it would be subject to approval by the Senate.
Republicans currently have the Senate majority, though two run-off elections in Georgia could change this. If Democrats take the Senate, Schumer and Warren might have a way to push their proposal through. If Republicans keep the majority, the proposal will likely be dead in the water.
3 ways to pay off your student loans
Assuming that a $50k relief package isn’t likely to get approved anytime soon, here are three ways you can start paying off your student loans fast:
- Create a budget: Create a budget and stick to it. Be strict with your expenditures and cut out any unnecessary purchases.
- Put extra money toward your loans: Receive a bonus from work? An unexpected tax rebate come through? Don’t pass go, don’t collect $200—put that extra cash straight toward your loans. You can pick a debt repayment plan, such as the debt snowball and avalanche methods, with the loan payoff calculator.
- Pay over the minimum: If you’re only paying the minimum amount of your loans each month, you won’t be able to pay them off anytime soon. Make sure to tell your loan servicer to apply overpayments to your current balance — otherwise, they might put that money towards the following month.
Categories: Personal and Family Finances