For those who owe a lot of money on student loans but cannot afford to pay them back, student loan forgiveness is an option. In accordance with the College Cost Reduction and Access Act, Congress established the program in 2007. It is intended to provide individuals with a chance to escape the burden of federal student loans. You must, however, work in the public sector full-time to be eligible for this program.
Biden’s COVID-19 pandemic gave Biden extraordinary powers
President Biden has continued to use the COVID-19 emergency to forgive student loans despite the CDC’s recent declaration that there is no longer a pandemic. Biden has subsidized the cost of student loan debt using this emergency, but many legal experts and activists have criticized his actions.
Verifying that the President is not abusing his emergency powers is the first step in this procedure. Emergency powers are rarely sufficient replacements for legislative action and do not address long-term issues. Biden won’t be able to use emergency powers to discharge student debt after his COVID-19 emergency declaration expires. This means that millions of Americans will continue to struggle with student loan debt, and that we must work to fix our broken legislative system.
Existing forgiveness programs
Recent announcements from the Department of Education have expanded the eligibility for current student loan forgiveness programs. Millions of borrowers could benefit if these new criteria are put into place. Low-income borrowers and those employed in the public sector would receive relief under the new standards. Additionally, the new standards will improve student and taxpayer protections.
State and federal laws affect the existing student loan forgiveness programs differently. Federal programs typically provide relief for loan balances up to $10,000. Although many people find great relief from federal student loan debt forgiveness programs, they do not completely eliminate the debt. There are other approaches to managing your debt, though.
The new student loan forgiveness plan, put forth by President Joe Biden, may be a welcome relief for student loan borrowers, but it is not without its limitations. The plan cancels up to $10,000 of a student loan for borrowers who earn less than $125,000 annually or $150,000 if a couple files jointly. The plan also limits the number of borrowers who are eligible, which financial advisors say will be an issue for many.
Another limitation of student loan forgiveness is that it does not apply to people with excessive incomes, such as Ivy League lawyers. Moreover, while the program was created to benefit low-income families, the vast majority of borrowers fell into income brackets. Although automatic qualification is a positive step, the application process for student loan forgiveness may be anti-progressive.
Mean-testing for student debt forgiveness is a policy that is supposed to help people who need it most. However, this policy has many flaws. First of all, it systematically understates the benefits of student loan forgiveness, which goes to recent graduates who would earn significantly more in future years. Second, means-testing only considers reduced balances and payments and doesn’t take into account the indirect effect of lower balances on those who default. While different methods may produce different results, one thing is clear: means-testing for student loan forgiveness isn’t a good solution for student debt relief.
In addition to making student loan forgiveness less accessible, means-testing adds administrative and time barriers to eligibility. Mean-testing also excludes vast swaths of working class debtors, those who attend medical school during a public health crisis, and lawyers who don’t land high-paying corporate jobs.