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Student Loan Forgiveness: How Major Proposals Compare

Here’s how two major proposals on student loan forgiveness compare.

Here’s what you need to know — and what it means for your student loans.

Student Loans

As President Joe Biden decides whether to enact wide-scale student loan forgiveness for more than 40 million student loan borrowers, two major proposals on student loans could influence Biden:

  1. Democrats: U.S. Department of Education proposal on student loan forgiveness; and
  2. Republicans: proposal for student loan relief;

The proposals from the U.S. Department of Education and Republicans in Congress offer competing visions for the future of student loan forgiveness and student loan repayment. While Congress likely won’t pass the Republican plan now, Biden could incorporate elements of the proposed legislation into his plan for student loans. Leaked internal documents from Biden’s Education Department provide a detailed proposal for student loan forgiveness waiting for Biden’s approval. In contrast, Republicans proposed major legislation that could reshape the debate on student loan cancellation. Here’s how they compare.

Student loan forgiveness

Democrats: $10,000 of student loan forgiveness for all federal student loan borrowers

Republicans: no student loan cancellation

The draft proposal from the U.S. Department of Education recommends $10,000 of student loan forgiveness for all federal student loan borrowers. This would include student loan borrowers with Direct Loans, Parent PLUS Loans, FFELP Loans, Perkins Loans and Grad PLUS Loans. Progressive Democrats in Congress still want Biden to cancel $50,000 of student loans, but the president has been reluctant to do so. In contrast, Republicans don’t want any wide-scale student loan cancellation. Republicans say broad student loan cancellation is unfair wealth redistribution that disproportionately benefits high-income earners at the expense of Americans who didn’t attend college or who don’t have student loans. Republicans also claim Biden has canceled $400 billion of student loans.

Public service loan forgiveness

Democrats: continue the Public Service Loan Forgiveness program

Republicans: end the Public Service Loan Forgiveness program

Democrats have long supported the Public Service Loan Forgiveness program. While the program garnered a 99% rejection rate among student loan borrowers, Biden is focused on fixing student loan forgiveness. For example, Biden introduced a limited waiver for student loan forgiveness, which enabled borrowers to count previously ineligible student loan payments toward the requirements for student loan forgiveness. In contrast, Republicans in Congress proposed eliminating the Public Service Loan Forgiveness program, which grants full federal student loan cancellation for eligible student loan borrowers. Since becoming president, Biden has canceled $8 billion of student loans for public servants. Republicans say public service loan forgiveness is another expensive government program, and public servants can get student loan cancellation through income-driven repayment plans. Under the Republican proposal, student loan borrowers seeking public service forgiveness before July 2023 will be permitted to continue with the program.

Student loan repayment

Democrats: simplify student loan repayment

Republicans: simplify student loan repayment

Both Democrats and Republicans want to simplify student loan repayment. Biden has simplified the rules on student loan repayment and has worked to eliminate bureaucracy within the U.S. Department of Education. For example, Biden has proposed major changes to student loan servicing. Both Biden and congressional Republicans want to simplify income-driven repayment. Currently, there are four income-driven repayment plans: IBR, PAYE, REPAYE and ICR. Republicans want to replace these four income-driven repayment plan with a single student loan repayment plan similar to Income-Based Repayment (IBR). Biden also supports a single income-driven repayment plan, although he recently delayed his new plan for student loans.

Student loan interest capitalization

Democrats: eliminate the capitalization of student loan interest

Republicans: eliminate the capitalization of student loan interest

Democrats and Republicans agree that the capitalization of student loan interest — which adds accrued student loan interest to your student loan balance — should end. Borrowers don’t like student loan interest capitalization because their student loan balances grow faster, and borrowers pay interest on their principal and interest balances. The Biden administration is considering eliminating the capitalization of student loan interest, while Republicans referenced this provision in their proposed legislation.

Student loan payment pause

Democrats: extend the student loan payment pause

Republicans: end the student loan payment pause; restart student loan payments

The student loan payment will end on August 31, 2022. Progressive Democrats such as Sen. Elizabeth Warren (D-MA) have urged the president to extend the student loan payment pause for the seventh time. Warren has argued student loan borrowers are not prepared to restart student loan payments, and more borrowers will default on their student loans. While Biden previously has extended student loan relief, Biden hasn’t commented on the prospect of any further extensions. In contrast, Republicans proposed to end the student loan payment pause and restart student loan payments immediately. Without further guidance from the Biden administration, student loan borrowers should prepare for the end of student loan relief and the restart of federal student loan payments on September 1. Here are some of the most popular ways to pay off student loans and save money:

Student Loans: Related Reading

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