Republicans have proposed to end student loan forgiveness for millions of student loan borrowers.
Here’s what you need to know — and what it means for your student loans.
A blockbuster new proposal on student loans from congressional Republicans would eliminate one of the most popular student loan forgiveness programs: public service loan forgiveness. A new bill from Reps. Virginia Foxx (R-NC), Elise Stefanik (R-NY) and Jim Banks (R-IN) would end the troubled program for student loan cancellation.
According to their proposed legislation:
- the Public Service Loan Forgiveness program would be eliminated;
- student loan borrowers who are currently pursuing public service loan forgiveness would be protected; and
- this student loan forgiveness would end after July 1, 2023.
End of public service loan forgiveness
It’s not the first time that Republicans have proposed to end public service loan forgiveness. For example, Republicans say Biden has canceled $400 billion of student loans, and there should be no more student loan forgiveness, especially one-time, wide-scale student loan cancellation. In his annual budget, President Donald Trump proposed ending public service loan forgiveness amid other cuts to the U.S. Department of Education and recommendations to change student loans. Congress created the Public Service Loan Forgiveness program in 2007, allowing borrowers to cancel their federal student loans if they meet certain requirements. For example, student loan borrowers must be employed full-time (at least 30 hours per week) by an eligible public service or non-profit employer and make at least 120 monthly student loan payments. The program has struggled for years, with rejection rates as high as 99% for borrowers. However, Biden proposed major changes to student loans so that more student loan borrowers qualify for student loan forgiveness. For example, Biden has canceled $8 billion of student loans for public servants. Biden also has implemented a limited waiver for student loan forgiveness, which allows student loan borrowers to “count” past student loan payments that were previously ineligible for student loan forgiveness. Last month, Biden proposed to extend this limited waiver for student loan forgiveness beyond October 31, when it expires. He also delayed the announcement of a new plan for student loan repayment. That said, Biden could introduce a simplified income-driven repayment plan soon.
Student loan cancellation: why end student loan forgiveness
Biden and some Republicans in Congress have disagreed over the future of student loan forgiveness. Supporters of public service loan forgiveness recognize the program needs to be fixed. However, they believe the program is essential student loan relief for police officers, firefighters, servicemembers, teachers, nurses and other public servants. Democrats also recognize that ending student loan forgiveness for public servants could discourage student loan borrowers from seeking public sector and non-profit careers. Republicans who oppose student loan forgiveness want the federal government to save billions of dollars. They believe student loan forgiveness is unfair wealth redistribution, which benefits high-income earners and hurts Americans who didn’t attend college or who don’t have student loans. Since Democrats control Congress and the White House, this proposed legislation likely won’t become law in the near term. However, other components of the proposed bill, such as the elimination of capitalized student loan interest, could be included in broader student loan reform.
Student Loans: next steps
Biden is facing three important deadlines for student loans. In the coming days, Biden has said he will decide whether to enact wide-scale student loan forgiveness. This decision is independent of public service loan forgiveness, a separate federal program. Biden also could address the future of student loans with additional changes to student loans and student loan repayment. The student loan payment pause ends within days. This means student loan borrowers should be prepared to restart student loan payments on September 1. Here are some of 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)