Democrats have a new plan to fix student loan forgiveness.
Here’s what you need to know.
Student Loans
Student loan cancellation has experienced several recent setbacks. Now, a cadre of U.S. senators and representatives took a break from pushing student loan cancellation to focus on student loan forgiveness. In a letter to U.S. Secretary of Education Miguel Cardona, the members of Congress — which include Sen. Tim Kaine (D-VA) and Sen. Kirsten Gillibrand (D-NY) — want public service loan forgiveness fixed in at least 4 ways. They want to remove the impediments, bureaucracy and roadblocks that have resulted in a staggering 98% of applications for student loan forgiveness from being rejected. It’s the latest update on student loan forgiveness. Here are their 4 ways to fix student loan forgiveness:
1. All federal student loans should be eligible
Created in 2007, the Public Service Loan Forgiveness helps student loan borrowers who work full-time for a qualified public service or non-profit employer get federal student loan forgiveness after 120 monthly payments, among other requirements. Technically, all federal student loans are eligible, but student loan borrowers have to take an additional step if they have FFELP Loans, for example. To qualify for public service loan forgiveness, student loan borrowers with FFELP Loans need to consolidate their student loan debt into a Direct Consolidation Loan. Rather than make student loan borrowers take this additional step, Democrats wantall federal student loans to be eligible and to waive the requirements to consolidate student loans first.
2. Make all student loan payment plans eligible
Surprisingly, not all student loan payment plans are eligible for public service loan forgiveness. It’s not as simple as paying off student loans. To qualify for public service loan forgiveness, you must be enrolled in eligible income-driven repayment plan and make the majority of your student loan payments while enrolled in a qualified student loan repayment plan. The latest student loan debt statistics show that 1.4 million student loan borrowers were unknowingly enrolled in the wrong student loan repayment plan, even though they are pursuing student loan forgiveness. The U.S. Department of Education tried to correct this hurdle through the creation of the Temporary Expanded Student Loan Forgiveness Program (TEPSLF) to help borrowers who are enrolled in the graduated or extended student loan repayment plans. However, this program has had similar exceedingly high rejection rates. The simple fix? Make all student loan repayment plans elgibile for student loan forgiveness.
3. Student loan borrowers shouldn’t have to work in public service when they get student loan forgiveness
When you get student loan forgiveness, you must be working for a qualified public service or non-profit employer. However, due to the Covid-19 pandemic, many jobs in these sectors have been eliminated. So long as student loan borrowers have completed 10 years of student loan repayments while working for a qualified employer, the signatories want them to get student loan forgiveness. Again, this is about removing barriers to student loan forgiveness and making it simpler for student loan borrowers to get student loan relief.
4. Share information across federal and state governments
To qualify for student loan forgiveness, you must proactively submit information to determine if your employer qualifies. This can be complicated for many student loan borrowers. Why? It’s insufficient to say you “work in public service.” It’s not about your role; it’s about your employer. Rather than make student loan borrowers “prove” their eligibility, a simpler fix could be to share information across federal and state governments to make student loan borrowers eligible automatically. This could grant more student loan borrowers access to student loan forgiveness.
Will your student loans get cancelled?
Since the beginning of the Covid-19 pandemic and September 30, 2021, student loan borrowers will get more than $90 billion of student loan forgiveness. While these four fixes are proposals, both President Joe Biden and Cardona are interested in simplifying the Public Service Loan Forgiveness program. Given the 98% rejection rate, it’s possible that these fixes could be implemented. if so, more student loan forgiveness could be on the way if more student loan borrowers become eligible. If Biden doesn’t cancel student loans, it’s possible he would support these improvements to student loan forgiveness. Another student loan proposal would grant student loan forgiveness to public servants automatically after 10 years, even if they don’t meet any other requirements. There’s no timetable to implement these proposals or guarantee they will be implemented. That said, they have a higher likelihood of being implemented compared with wide-scale student loan cancellation.
This article originally appeared on Forbes.
