Student loans have been a hot topic this past year with celebrities like Hasan Minhaj and presidential candidates bringing light to the student loan debt crisis and plans on how they are going tackle it. People look for ways to pay off their student loans fast, others fall prey to a number of student loan scams. The confidence once had with student loan forgiveness programs has now been lost, There have been a number of student loan lawsuits, certain legislative proposals and much more.
We have no strong evidence that all or a few of these proposals will be implemented. Congress will play a crucial role in the future of your student loans. They can have either the largest or smallest impact on the student loan changes in the coming year.
In 2020 we can expect a number of changes to take place in the world of student loans, let us get a deep dive on these changes and how we can use these changes to our advantage.
Table of contents
- Student loan forgiveness
- Elimination of origination fees
- Income-driven repayment
- Public Service Loan Forgiveness
- Student loan discharge
- Student loan refinancing
1) Student loan forgiveness
The question arose if you should get your student loans forgiven, some officials say it’s ridiculous while others support the idea of it. 2020 presidential candidates, Sen. Bernie Sanders and Sen. Elizabeth Warren support the idea of stand rerefiudent loan forgiveness.
An official of the US Department of Education has recently resigned to run for the US Senate in Georgia, he made it known that he supports student loan forgiveness. The US Secretary of Education is against the idea of a wide-scale student loan forgiveness, supporting her claim by asking who could pay for the loans to be forgiven. In order to forgive a loan on behalf of a borrower, it doesn’t mean that the loan is just forgotten or it disappears into thin air. One has to pay for the loans in order for it to be forgiven.
Betsy Devos believes that the forgiveness of these student loans will be funded at the end by the taxpayer. And the ones who have made payments towards their loans and got rid of them will ultimately start paying other borrower’s loans through their taxes.
Learn more about student loan forgiveness
2) Elimination of origination fees
The College Affordability Act which was proposed by the House of Democrats looks to update the Higher Education Act of 1965. It aims to remove the origination fees which is charged when you borrow a student loan.
If this proposal is actually implemented then it can save those borrowers a lot of money. It should be noted that this particular issue has bipartisan support.
3) Income-driven repayment
Student loan repayment is an important phase for a borrower. If handled the right way one can improve their credit score which increases their credibility as a borrower. While you go about repaying your federal student loans one option is income-driven repayment. The income-driven repayment plans like PAYE and REPAYE, your monthly payment to be made based on your discretionary income. Post 20 to 25 years of payments the remainder of your loan balance is forgiven.
There have been attempts made to simplify the income-based repayment plan for federal student loans, here is what the Vice President and 2020 Presidential candidate had to say -
For those borrowers who make less than $25,000 per year wouldn’t have to make any payments towards their undergraduate student loans. And at this time there would be no accrue of interest.
Those borrowers who make over $25,000 per year would have to make payments which would be only 5% of your discretionary income towards any federal student loan payments.
After making 20 years of payments towards your federal student loans you can have the remainder of your federal student debt forgiven. The amount forgiven will not be subjected to income tax.
4) Public Service Loan Forgiveness
The Public Service Loan Forgiveness program was proposed to be eliminated by President Trump. In addition to this, it was proposed to introduce a single income-driven repayment plan. This newly proposed repayment plan would cap the monthly student loan payments at 12.5% of the borrower’s discretionary income. And after 15 years of repayment, the remaining balance will be forgiven.
The current Public Service Loan Forgiveness program is broken says Joe Biden. Loan forgiveness is a great way to get by your debt. Officials haven’t given up on loan forgiveness, Biden has proposed to create a new program. This program has offered to give $10,000 of undergraduate or graduate student loan debt relief to a borrower each year for national or community service. A borrower can expect to receive this assistance for up to 5 years. If the borrower works at a non-profit, the government or in a school they will automatically be enrolled for the forgiveness program.
5) Discharge of student loans during bankruptcy
Borrowers would be allowed to discharge their student loans in bankruptcy with the help of the proposed bipartisan legislation.
6) Student loan refinancing
With the help of the College Affordability Act, a borrower can refinance their student loans to the current interest rates.
You still can’t refinance your federal student loans with the federal government. In case you do want to refinance your student loans, you can refinance with a private lender. You can refinance your loans whether it being private loans, federal student loans or even both together with the help of a private lender. It is crucial to evaluate all the factors and terms and conditions in order to find the best refinancing lender for you.
When you refinance your student loans you can get lower monthly payments, lower interest rates and eventually pay off your student loans faster