There may be major changes to your student loans on the horizon.
Here’s what you need to know.
If you follow the headlines, there have been multiple twists and turns this year regarding student loans. Billionaires have paid off people’s student loans. Student loan scams have run rampant. Student loan forgiveness programs have faltered. With legislative proposals, major lawsuits and 2020 presidential campaign rhetoric, there may be major student loan changes in the coming year.
Of course, all, some or none of these proposals could be implemented. Look to Congress as the branch of government to have the biggest (or smallest) impact on the future of your student loans.
Here’s a snapshot of the hot button issues regarding your student loans:
Student Loan Forgiveness
Should your student loans be forgiven? Sen. Bernie Sanders (I-VT) and Sen. Elizabeth Warren (D-MA), both 2020 presidential candidates, says yes. A top U.S. Department of Education official even resigned last week to run for the U.S. Senate in Georgia and now says he supports student loans forgiveness.
However, U.S. Secretary of Education opposes wide-scale student loan forgiveness and said it would be “crazy.” Her primary issue is: who will pay for student loan forgiveness? DeVos believes that, ultimately, federal taxpayers will foot the bill. Other have asked: what about borrowers who already paid off their student loans?
Could college become free? Not exactly. While many Democratic presidential candidates have called for “free” community college, others are divided on tuition-free public colleges, which would require federal funding and at least some degree of state cooperation.
Eliminate Origination Fees On Student Loans
House Democrats have proposed The College Affordability Act, which would update the Higher Education Act of 1965, and among other proposals, eliminate origination fees when you borrow student loans. This issue has bipartisan support, which if implemented, would save borrowers money.
If you are repaying federal student loans, one option is income-driven repayment. Each income-driven repayment plan – such as PAYE and REPAYE – caps your monthly student loan payment based on your discretionary income and then provides student loan forgiveness after 20 to 25 years of on-time payments.
Former vice president Joe Biden, a 2020 presidential candidate, wants to simplify income-based repayment for federal student loans:
If you make less than $25,000 per year: you would owe no payment on your undergraduate student loans and also no interest would accrue.
If you make more than $25,000 per year: you would pay only 5% of your discretionary income over $25,000 toward federal student loan payments.