A U.S. congressman has proposed major changes to student loan forgiveness.
Here’s what you need to know — and what it means for your student loans.
U.S. Rep. Joe Courtney (D-CT) introduced new legislation yesterday — the Simplifying and Strengthening PSLF Act — to help more student loan borrowers qualify for student loan forgiveness and cancel their student loans. If Congress passes this significant legislation, there would be huge changes to student loans:
- Faster student loan forgiveness: Student loan borrowers can get public service loan forgiveness after five years rather than ten years;
- More student loan payments are eligible: More student loan payments would be eligible for student loan forgiveness. For example, any previous student loan payment will count as a qualifying student loan payment, regardless of federal loan type, student loan repayment plan, or whether the student loan payment was made in full or on time.
- Count student loan forbearance: Student loan borrowers in the military on active duty or in the Peace Corps, for example, can get credit for student loan forgiveness even if their student loans were in student loan forbearance or student loan deferment; and
- Consolidate student loans: If you have Parent PLUS Loans or FFELP Loans and have already consolidated your student loans, you could consolidate student loans again into a Direct Loan to qualify for public service loan forgiveness.
Student loan forgiveness: impact
This proposed legislation is a companion bill to legislation that Senators Sheldon Whitehouse (D-RI) and Jeff Merkley (D-OR) introduced in May. Strikingly, this proposal would cut the time in half to get student loan forgiveness. Rather than making 120 monthly student loan payments, student loan borrowers would make 60 student loan payments before getting their student loans canceled. The Public Service Loan Forgiveness program grants complete federal student loan cancellation for student loan borrowers who work for a qualified public service or non-profit employer. Borrowers must meet other obligations, such as enrolling in an income-driven repayment plan such as PAYE, REPAYE, IBR or ICR. The program has been plagued by high rejection rates and slow processing times, frustrating student loan borrowers and policymakers.
Student loan forgiveness: Biden wants more student loans canceled
While Biden hasn’t enacted wide-scale student loan cancellation, he has canceled more than $25 billion of student loans since becoming president. This includes $8.1 billion of student loan forgiveness for public servants and $6 billion of student loan forgiveness under borrower defense to repayment. Biden also proposed to rework student loan forgiveness with a significant announcement last week. Biden’s plan for student loan forgiveness overlaps with the two proposals in Congress. Importantly, Biden proposed to make the limited waiver for student loan forgiveness permanent. Before Biden’s announcement, the limited waiver for student loan forgiveness expired on October 31, 2022 and helps student loan borrowers get student loan forgiveness faster. After a public comment period, Biden’s changes will be implemented by July 1, 2023. That said, Biden’s proposal differs from the two bills in Congress. For example, both bills in Congress would allow public servants to get student loan forgiveness after five years. While Biden proposed a similar plan as a presidential candidate, Biden has not endorsed the same plan as president. With student loan payments restarting soon, make sure you understand the best ways to pay off student loans and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
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