As with any political issue, there are arguments from both sides – those for student loan debt forgiveness and those against. Moreover, there are many degrees to which people believe student loans should be forgiven and many ideas as to how to fund such programs.
In this article, we will look at the current student loan forgiveness landscape, examine arguments for and against student loan forgiveness, and show where each candidate stands.
What Are the Current Student Loan Forgiveness and Repayment Options?
To best understand the politics behind student loan forgiveness, it’s worth reviewing the current situation. Presently, student loan forgiveness is granted after 20 or 25 years of repayment on income-based repayment plans, in addition to other programs for public service employees and teachers.
Besides the Standard 10-Year Repayment Plan, the U.S. Department of Education offers three income-based repayment plans that come with loan forgiveness after a certain amount of time. A summary of each is as follows:
- Income-Based Repayment (IBR) Plan: For those who borrowed before 2014, monthly payments are 15% of discretionary income, with the remaining balance being forgiven if such payments are made for 25 years. For those who borrowed after 2014, a change was put in place so that the payments are only 10% of discretionary income, and the remaining balance is forgiven after 20 years.
- Pay As You Earn (PAYE) Repayment Plan: For those who are new borrowers on or after Oct. 1, 2007, and have received a disbursement of a Direct Loan on or after Oct. 1, 2011, this plan allows monthly payments that are 10% of discretionary income but never more than what you would pay with the Standard 10-Year Repayment Plan. The remaining loan balance is forgiven after 20 years.
- Revised Pay As You Earn (REPAYE) Repayment Plan: This plan opens up a similar program for borrowers regardless of when they borrowed. This plan is almost the same as PAYE except that your monthly payment is 10% of your discretionary income, regardless of whether that ends up being more than your Standard 10-Year Repayment Plan payment. Also, if any of your loans were taken out for graduate study, your remaining balance will not be forgiven until after 25 years of payments have been made.
PAYE and REPAYE were an improvement on the Income-Based Repayment (IBR) Plan for those who took out loans before July 1, 2014. If you took out loans after this date, IBR and PAYE are essentially identical.
The options described above are meant to help those who struggle financially and who have large balances. Most people will end up paying off their loan balance under these plans before the end of the payment period is reached and forgiveness is granted.
There is a loan forgiveness plan specifically for public service employees called the Public Service Loan Forgiveness (PSLF) program. To qualify, you must work in public service for 10 years while making consistent payments on your student loans through one of the income-based repayment plans. At the end of 10 years, the remaining loan balance is forgiven.
Teachers who teach in areas that serve low-income students for five consecutive years may qualify for the Teacher Loan Forgiveness program, which grants $5,000 or $17,500 in forgiveness, depending on subjects taught.
Arguments in Favor of Student Loan Forgiveness
The arguments in favor of student loan forgiveness vary based on the proposed forgiveness plan but generally fall into the following categories:
- College costs have gotten out of control. It costs significantly more now to earn a degree than it did in the past while yielding much smaller economic benefits comparatively. Loan forgiveness can help offset this.
- College degrees are necessary for success but largely unaffordable, further disadvantaging the already disadvantaged.
- The amount of outstanding student loan debt (currently nearly $1.6 trillion) is a national crisis and should be resolved.
- Student loan debt disproportionately hurts people of color and those with low income.
- Debt prevents people from starting a family, buying a home, and saving for retirement.
- Forgiving student debt would provide an economic boost.
Arguments Against Student Loan Forgiveness
Arguments in opposition generally fall into the following categories:
- Student loan forgiveness is unfair to those who paid their way or paid off their loans.
- The cost of a loan forgiveness program will be too much or too great of a tax-payer burden.
- Forgiving student loans doesn’t solve the rising cost of college; it only passes it along.
- The forgiveness plans already in place are sufficient.
- Schools will be unaccountable for the debt incurred by students and may take in too many students because they know they’ll get paid for them.
- Student loan debt should be treated no differently than other debts, which are not forgiven.
Where Joe Biden Stands on Student Loan Forgiveness
Joe Biden believes the current loan forgiveness programs associated with income-based repayment plans are not generous enough, and they should all be consolidated into a simpler plan.
Biden proposes the following:
- Individuals making $25,000 or less per year should not owe any payments on their undergraduate federal student loans or accrue any interest on those loans.
- Everyone else should only have to pay 5% of their discretionary income over $25,000 toward their loans. This is half of the current required payments of most income-based repayment plans.
- After 20 years, the remaining student loans for people who have responsibly made payments through the program will be 100% forgiven.
- Anyone with new and existing student loans will be automatically enrolled in the income-based repayment program, with the opportunity to opt out if they wish.
- The forgiven debt will not be taxed. (Currently, anyone receiving loan forgiveness ends up owing taxes on the forgiven amount as though it was income.)
Biden also has proposals for modifications to the PSLF program. He considers the current program to be broken and would like to replace it with a new, simpler program, which offers $10,000 in undergraduate or graduate student debt relief for every year of national or community service, up to five years.
Any individuals working in schools, government, and other nonprofit settings will be automatically enrolled in this program, and up to five years of prior national or community service will also qualify.
Biden is hoping to secure passage of the What You Can Do for Your Country Act of 2019, which opens up loan forgiveness to adjunct professors.
In addition, Biden is considering forgiving all undergraduate tuition-related federal student debt from public colleges and universities for debtholders earning up to $125,000 per year, with an appropriate phaseout beyond that limit.
To pay for the plan, Biden proposes repealing the high-income “excess business losses” tax cut included in the CARES Act.
Where Donald Trump Stands on Student Loan Forgiveness
Like Biden, Trump also thinks the current income-based repayment plans are too many and should be combined. But his proposal for how the new consolidated plan would work is a little different and includes the following:
- The consolidated income-based repayment plan would cap monthly payments at 12.5% of discretionary income.
- Undergraduate borrowers would have their remaining balance forgiven after 15 years of payments.
- Graduate borrowers won’t have their remaining balance forgiven until after 30 years of payments.
For undergraduate borrowers using any of the current income-driven repayment plans, this increases monthly payments while decreasing the term – two effects that may roughly cancel each other in the long run. Graduate borrowers, however, will receive less forgiveness under this program.
In addition to the above proposals, Trump would like to eliminate the Public Service Loan Forgiveness Program, citing this would save the federal government significant money. (Those currently utilizing the program, however, would still be able to receive forgiveness.)
Stay Informed About Student Loan Forgiveness
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