Debt Forgiveness Details
Today, the White House announced details of Biden’s Student Loan Forgiveness Plan.
- The Department of Education will provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the Department of Education, and up to $10,000 in debt cancellation to non-Pell Grant recipients. Borrowers are eligible for this relief if their individual income is less than $125,000 ($250,000 for married couples).
- To ensure a smooth transition to repayment and prevent unnecessary defaults, the pause on federal student loan repayment will be extended one final time through December 31, 2022.
- Fixing the broken Public Service Loan Forgiveness (PSLF) program by proposing a rule that borrowers who have worked at a nonprofit, in the military, or in federal, state, tribal, or local government, receive appropriate credit toward loan forgiveness.
- Caps monthly payments for undergraduate loans at 5% of a borrower’s discretionary income—half of the rate that borrowers must pay now under most existing plans. This means that the average annual student loan payment will be lowered by more than $1,000 for both current and future borrowers.
- To further reduce the cost of college, the President will continue to fight to double the maximum Pell Grant and make community college free.
- The Department of Education estimates that roughly 27 million [Pell Grant] borrowers will be eligible to receive up to $20,000 in relief.
- Provide relief to up to 43 million borrowers, including cancelling the full remaining balance for roughly 20 million borrowers.
- A typical nurse (making $77,000 a year) who is married with two kids would pay only $61 a month on their undergraduate loans, compared to the $295 they pay now under the most recent income-driven repayment plan, for annual savings of more than $2,800.
Free Money, What Can Go Wrong?
None of this free money addresses the root cause of escalating tuition costs: The loan program itself, Pell Grants, administrative costs, massive pension plans for teachers, preposterous coaching salaries, and the 2005 bankruptcy reform act by President Bush that made student debt not dischargeable in bankruptcies.
We have another free money announcement, no strings attached, and literally nothing to address the root cause of the problem.
Future caps at 5% of a borrower’s discretionary income will encourage still higher college education costs.
Conveniently, inflation will not kick in until after the mid-term election.
If you paid off your student loan, consider yourself a sucker.
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Two Years Early But Right on Target
What’s Going On?
Legal Challenges Coming
Expect legal challenges to this announcement. Is the president Constitutionally authorized to give away an estimated $300 billion over 10 years?
Hopefully the Supreme Court takes the challenge pronto.
This post originated on MishTalk.Com.
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