President Biden unveiled more details on a new student loan forgiveness scheme. (iStock)
The Department of Education revealed more details about President Joe Biden’s new forgiveness scheme, which is less broad-based than the previous mass debt relief program struck down by the U.S. Supreme Court in June, but could still impact millions.
Among the Americans who could be in line for debt relief are those who currently owe more than they borrowed and are low-income or enrolled in plans aligning payments to borrowers’ income, according to a proposal the Education Department published Monday. The proposal would supply up to $10,000 of relief to all borrowers who have experienced balance growth due to interest. Multiple proposals would supply greater interest relief to lower-income borrowers enrolled in SAVE.
Also benefiting from debt relief would be borrowers whose loans first entered repayment 20 years ago. This provision would supply one-time relief 20 years after entering repayment on undergraduate loans, the scheme said. All other borrowers would acquire forgiveness after 25 years of payments.
The Biden student loan forgiveness scheme also seeks to include borrowers eligible for existing loan forgiveness plans but have not applied and those who attended schools that “failed to deliver sufficient financial value.”
The proposal will face a group of negotiators on December 11 and 12. This meeting is the next required public step before the department can start working on draft rules, which will be released for public comment next year.
“Student loans are supposed to be a bridge to a better life, not a life sentence of endless debt,” U.S. Secretary of Education Miguel Cardona said. “This rulemaking process is about standing up for borrowers who’ve been failed by the country’s broken student loan system and creating new regulations that will reduce the burden of student debt in this country.”
If you’re having trouble making payments on your private student loans, you won’t benefit from federal relief. You could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes.
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3.6 million get some form of student debt relief
The Biden administration has approved $127 billion in debt relief for nearly 3.6 million borrowers and launched the most affordable student loan repayment scheme in history, the Saving on A Valuable Education (SAVE) scheme. The SAVE scheme can lower monthly payments to zero dollars or help borrowers making payments save at least $1,000 a year. About 2.9 million borrowers who signed up for the Biden administration’s SAVE scheme now have a payment of $0.
Earlier this month, Biden emailed over 800,000 student loan borrowers, congratulating them on receiving student loan forgiveness. The borrowers receiving the email were those who weren’t accurately credited for student loan payments that should have given them forgiveness or people placed into forbearance by loan servicers who violated Department of Education policies.
“For too long, the student loan program failed to live up to its commitments – and millions appreciate you never got the relief you were owed because of errors and administrative failures,” Biden said in the email sent to borrowers. “I vowed to fix that, and I’m proud that my Administration has delivered on that promise. I hope this relief gives you a little more breathing room.”
If you’re having trouble making your private student loan payments, you could consider refinancing your private student loans to a lower interest rate. Visit Credible to speak with a student loan expert and get your questions answered.
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Borrowers struggle with repayments this holiday
Student loan repayments resumed in October after a more than three-year pause, with borrowers paying an average of $203 a month, according to a recent Experian report.
The additional expenditure means that some borrowers will find the holiday unaffordable. Overall, inflation and rising costs have roughly 24% of Americans worried about holiday spending, according to a Credit Karma survey. To afford the upcoming festive season, 26% of respondents planned to limit their contributions to savings.
“The holidays are often a joyful time of year, but they can also take a toll on consumers’ wallets,” Credit Karma Consumer Financial Advocate Courtney Alev said. “This year, many Americans have another expense to factor into their holiday budgets: their federal student loan payments – and, if our survey is any indication, it could be what tips consumers over the edge.”
If you are currently in school or starting soon and need more financial aid than you can acquire through FAFSA, you could consider taking out a private student loan. Visit Credible to find your personalized rate without affecting your credit score.
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