Heres What You Can Do Now
Until the President signs an executive order or a bill, nothing is certain. Thats why experts say you should hope for the best, but plan for the worst when it comes to your student loan debt. Regardless of what happens with legislation on student loan forgiveness, heres how you can make the most out of the current situation.
Student Loan Discharge For False Certification
You can obtain a false certification discharge when a school falsely certifies a borrowers eligibility for federal aid.
We never expect this situation to happen, right?
But contrary to what it seems, this type of student loan discharge is not uncommon. You may have an invalid certification and have no clue about it. Thats because there are multiple ways that a certification can become invalid.
What are the reasons why a certification would be void?
There are three situations that can cause this condition:
The first situation is if the institution wrongly proofs your ability to benefit from the degree.
For example, if you did not finish high school before starting college, an educational institution cannot allow you to start the college program unless you take an official exam and pass it. Thats because the educational legislations assume that students are not capable of benefiting from a university degree if they did not complete high school. So universities cannot accept students that did not prove the ability to benefit from a university degree.
The second way is if you are not able to meet the state requirements for employment in the occupation for which you have been trained.
Note that this doesnt apply to you if you simply cannot find a job. The student loan will be discharged only for people who cannot, by law, perform their professions.
This one is pretty self-explanatory and thankfully, not common.
What are the steps to receive this loan discharge?
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Possible Negative Consequences Of Canceled Student Debt
Economic consequences of total student loan debt cancellation may be far reaching. Detractors call student loan debt cancellation poor economic stimulus.
- One model estimates an economic multiplier of 0.08 to 0.23, suggesting federal costs may ultimately outweigh economic benefits.
- Education costs skyrocketed in the years following the launch of the federal student loan program economists posit that widespread loan forgiveness will cause another surge in costs for the next generation of students.
- Full student loan cancellation may disproportionately aid advanced degree holders rather than intended disadvantaged groups.
- Advanced degree holders are also more likely to save their money than spend it and stimulate desired economic growth.
- Cancelling student loan debt may result in higher inflation rates.
- Cancelling student loan debt may also result in higher interest rates.
Student Loan Forgiveness: Which Loans Are Eligible
Only direct loans made by the federal government are eligible for forgiveness. Stafford loans, which were replaced by direct loans in 2010, are also eligible. If you have other federal loans, you may be able to consolidate them into one direct consolidation loan that would make you eligible. Non-federal loans do not qualify for forgiveness.
In addition, borrowers with federal student loans who attended for-profit colleges and seek loan forgiveness because their school defrauded them or broke specific laws were recently dealt with a setback. On May 29, 2020, former President Trump vetoed a bipartisan resolution that overturned new regulations that make it much more difficult to access loan forgiveness. The new, more onerous regulations went into effect on July 1, 2020.
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Can Biden Cancel Debt Without Congressional Approval
The notion that the president can spend more than $1 trillion on wiping out Americans student debt by himself, with the stroke of a pen may sound far-fetched. But there is a coherent legal theory behind the idea.
The Higher Education Act of 1965 empowered the Department of Education to compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption. And thanks to a reform passed under Barack Obama in 2010, the federal government now owns roughly 92 percent of all student debt. Which is to say, more than $1.5 trillion of Americans student debt is owed to the Department of Education which has the explicit authority to waive any claim it possesses and can therefore unilaterally make all that debt disappear.
This theory makes sense to me. But it needs to make sense to federal judges in order to work, and thanks to the Trump presidency, the federal judiciary is quite conservative. Using an executive order to forgive federal student loans will likely be met with a lawsuit and preliminary injunction and eventually fail, Kantrowitz told NBC in November.
So for mass student-debt forgiveness to happen through executive action, three things would need to occur: The Department of Educations review would need to find that Biden has the authority to cancel student debt, Biden would have to decide to use that authority, and the judiciary would need to uphold his right to that authority.
Why Are Grades Important To The Student Loan Debate
We usually think of student loans as a financial or economic problem. This limits the discussion of student debt to tuition amounts, loans and financial aid. However, there are a few reasons academics also affect financial outcomes.
Good grades can help students qualify for academic scholarships. Academic achievement helps students qualify for more scholarship funding, and maintaining a GPA is often a requirement for college students to keep their scholarships. Therefore, a student who doesn’t do well in their classes can be responsible for a larger share of their tuition and may need to take out thousands more in student loans.
Of course, this isn’t true in all cases, but we have seen some students have higher student loan balances because they didn’t earn the grades they needed for their scholarships.
Academic success can also affect whether students complete their degree. About 57 percent of students who take out student loans drop out of college. These students will face the high cost of education without its associated pay bump. The result is a pervasive debt burden. Based on payments as a percentage of earnings, it will generally take 15 years longer to pay off student debt without a degree.
Better learning tools can help some of these students complete their degrees and achieve better financial outcomes.
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Who Was Included In This Survey
OneClass included 3,649 current college students in our January 2021 survey asking whether the new administration will enact a student debt forgiveness program.
Each survey participant is a current freshman, junior or senior at a four-year college or university in the U.S. The survey includes a wide geographic distribution of participants. More than 230 colleges were represented, including both public and private colleges as well as large and small schools in both urban and rural settings.
Key Biden Official Offers Mass Student Loan Forgiveness Isnt Going To Happen
The Biden administration has already taken some actions and had given a relaxation of nearly $10 billion to students in federal student loans this year. The administration is also planning a broad approach to student loan forgiveness and also has been extending existing programs such as Borrower Defense to Repayment and the Total and Permanent Disability Discharge program. These programs have resulted in and had a positive impact on hundreds of thousands of students.
Still, advocates are putting a lot of pressure on the administration. Biden has been facing a lot of pressure to relax students of paying additional debt cancellation and other relief via programs such as the Public Service Loan Forgiveness program, In the next month, hearings will bet started on with the governing key federal student loan forgiveness and repayment programs, which can help a lot of federal student loan system. In the meantime, the Department has already started sending out emails to students which are to make them aware to start planning for repayment in early 2022.
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Existing Federal Student Loan Forgiveness Programs
If a borrower expects to receive loan forgiveness under President Biden, they can stop making federal student loan payments during the payment pause and interest waiver period, which was extended through September 30, 2021. However, given the uncertainties around student debt cancellation, borrowers may want to continue making payments.
But, some borrowers may be eligible for an existing student loan forgiveness program. For example, Public Service Loan Forgiveness is available to borrowers who work full-time in a qualifying public service job. A borrower is eligible for loan forgiveness after making 120 qualifying payments.
During the payment pause, borrowers can still earn credit toward PSLF. As long as they continue to meet the eligibility requirements and submit the PSLF form, they will receive qualifying payment credit.
Borrowers who will not qualify for loan forgiveness when the relief period ends can also consider an income-driven repayment plan. With an income driven repayment plan, monthly payments are adjusted based on the borrowers annual income. After a specified period of time the debt is forgiven.
Democrats Step Up Pressure On Biden On Student Loan Forgiveness
Democrats are once again pressing President BidenJoe BidenBiden invokes Trump in bid to boost McAuliffe ahead of Election DayBusiness lobby calls for administration to ‘pump the brakes’ on vaccine mandateOvernight Defense & National Security Presented by Boeing Afghanistan reckoning shows no signs of stoppingMORE to act on student loan forgiveness, stepping up the pressure on the White House to deal with the issue even as it struggles to bring a divided party together around the presidents agenda.
Today would be a great day for President Biden and Vice President Harris to #CancelStudentDebt, Senate Majority Leader Charles Schumer
Pramila JayapalOvernight On The Money Senate Democrats lay out their tax plansManchin: ‘I think we’ll get a framework’ dealDem hopes for infrastructure vote hit brick wallMORE , the chair of the Congressional Progressive Caucus, similar tweeted on Thursday: Student debt relief is good for people and good for the economy. @POTUS can and must lift the burden of student debt for 43 million Americans.
Progressives want Biden to forgive up to $50,000 in federally held student debt per borrower. Doing so would wipe out all federal student debt for about 80 percent of the roughly 44 million Americans who collectively owe the federal government more than $1.5 trillion.
Debt relief advocates argue the issue could also help Democrats in next years midterms.
Gokey dismissed the program, saying it would only benefit 20,000 people.
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How Long Should I Wait To Hear About An Automated Review Before Taking Some Kind Of Action Myself
For now, the Education Department is offering reassuring words about its ability to fix many things on its own in the next several months.
This is cold comfort, however, if youve made payments for 14 years working as a teacher and feel you should have been done four years ago. Having hundreds of dollars of your monthly budget back, after all, represents an enormous life change and could mean finally being able to save for your own kids education.
If you havent heard from the department by February or seen updates on the statements and records that FedLoan, the entity that services people who are already enrolled in P.S.L.F., provides, call or send a message to FedLoan for guidance. If that doesnt yield any information, send a note to the departments ombudsman office and request a review. And if that doesnt work, contact your senators or congresspersons constituent service representatives and ask them to intervene on your behalf.
And if you have had the right type of loan all along but are hoping for a payment review, you should fill out the standard P.S.L.F. form if you havent done so yet or havent certified your employment before because you didnt think you needed to.
Forgiveness With Revised Pay As You Earn
As you might have figured by the name of the program, the Revised Pay As You Earn is a modified version of the PAYE.
Just like the PAYE, your payments will be capped at 10% of your discretionary income, and your student loans will be completely forgiven after 20 years.
Who is eligible for this program?
Here is where the difference between the PAYE and the REPAYE lies.
Theres no income eligibility requirement to get on REPAYE. This means that unlike PAYE, which was available only for loans taken out after Oct. 2007, anyone with eligible loans can apply to the REPAYE plan.
How to Apply for this program?
You could apply for REPAYE directly through FutureFuel.ios Reassess tool. Simply enter your information, browse eligible plans, and apply online.
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Other Campaign Promises Are More Likely
Bidens 2022 budget proposal does integrate some plans introduced during his campaign, providing relief for current and future students and borrowers, but would have to pass both houses of Congress to become law. They include:
Pell grant increases: The budget proposes raising the Pell Grant maximum by $400 along with a $1,475 increase in the American Families Plan. The request, if approved, also would enable Deferred Action for Childhood Arrivals, or DACA, recipients to receive Pell Grants.
Free, or lowered, tuition at some colleges: Tuition and fees toward a degree or certificate would be free for two years at a community college. And college would become more affordable for students at private and public historically Black colleges and universities, tribal colleges and universities, and additional Minority Serving Institutions, or MSIs.
Revised income-driven repayment and public service loan forgiveness: Biden didnt specify in the budget proposal how IDR and PSLF should be revised, but did lay out more specifics during the campaign. He proposed limiting IDR plans to just undergraduate loans, capping payments at 5% of income, not taxing the forgiven loan amount and automatically enrolling every federal student loan borrower in an IDR plan.
A group of senators, in a letter sent to Department of Education Secretary Miguel Cardona, outlined a tapered modification of IDR and a more limited expansion of PSLF, suggesting Bidens plans for these programs may face roadblocks.
Survey Results: What Do College Students Think Will Happen To Student Debt
More than 3,000 students were included in the OneClass poll asking if student loan forgiveness will be implemented.
Nearly two-thirds of college students are not optimistic that student loan forgiveness will occur. Almost a quarter of students are cynical about the issue and think that discussion of student loan forgiveness is a way to score political points or attract young voters. A small percentage of college students believe that a student debt forgiveness program will be implemented.
Do you believe the new administration will enact student debt forgiveness?
- No, they won’t: 63.5%
- It’s a debate being used for approval ratings: 23.5%
- Yes, they will: 13.0%
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Circumstances For Student Loan Discharge
- Permanent disability or death
- Unauthorized signature of the loan by the school without your knowledge
- False certification of student eligibility
- Unpaid refund, which is when you withdrew from school and it didnt return the required loan funds to your loan servicer
- School closure while you were enrolled
Discharging student loans through bankruptcy is extremely rare. It is technically not impossible, but demonstrating undue hardship is very difficult. Read more about the differences between forgiveness and discharge.
Teacher Loan Forgiveness Program
Student loan forgiveness for teachers is neither generous nor easy to qualify for. Teachers can have up to $17,500 of their federal direct and Stafford student loans forgiven by teaching for five complete and consecutive academic years at a qualifying low-income school or educational service agency. Loans that were issued before October 1, 1998, are not eligible.
You must be classified as a highly qualified teacher, which means having at least a bachelor’s degree and having full state certification. Only science and math teachers at the secondary level, and special education teachers at the elementary or secondary level, are eligible for $17,500 in forgiveness. Forgiveness is capped at $5,000 for other teachers.
You can qualify for both teacher and public service loan forgiveness , but you can’t use the same years of service to be eligible for both programs. So you’d need 15 years of teaching service to qualify for both programs, along with meeting all the specific requirements to earn each type of forgiveness.
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