Democrats Propose 5 Changes To Student Loan Cancellation

President Joe Biden (Photo by David Lienemann / The White House via Getty Images)

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The Democrats in Congress have proposed five changes to student loan cancellation.

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

Student Loans

In a letter to US Secretary of Education Miguel Cardona, a group of progressive Democrats – including Senate Majority Leader Chuck Schumer (D-NY) and Senator Elizabeth Warren (D-MA) – proposed five changes to student loan and student loan repayment Cancellation. Here are her top 5 suggestions:

1. Create a new student loan repayment schedule like this one

Income-oriented repayment plans help millions of student loan borrowers, but they are too complex. Rather than having multiple income-oriented repayment plans that can confuse student loan borrowers, the Department of Education should create a new income-oriented repayment plan that is available to all current and future student loan borrowers. As part of the new student loan repayment schedule for federal student loans:

• Student loan payments would be limited to no more than 10% of disposable income;
• Payments for student loans for no more than 20 years;
• Student loan waiver after 20 years;
• Student loan borrowers should be able to prioritize their cost of living prior to student loan payments;
• Student loan interest should not accrue faster than student loan borrowers can repay their student loans (“no negative amortization”);
• Existing student loan borrowers should automatically switch to this new, unified student loan repayment schedule; and
• new student loan borrowers should be able to seamlessly enroll by simply exchanging tax information to reduce red tape.

2. Termination of the student loan for all federal student loans, the borrower’s objection to the repayment rule

Members of Congress say it should be easier to cancel student loans for borrowers defrauded by their schools, including predatory for-profit colleges. They argue that the standard under the Trump administration became a nuisance to borrowers who had to prove their colleges harmed them and made it difficult to get the student loan cancellation. Instead, what they want is:

• Establish a uniform, fair and equitable defense rule for borrowers;
• applies to all current, future and former borrowers of the federal student loan;
• Termination of the student loan in full should be the guess, not the exception to the rule;
• any federal student loan borrower who has been the victim of “unlawful, unfair, fraudulent, or abusive higher education practices” should receive notice of termination of the student loan;
• If possible, student loan borrowers should not have to apply to terminate the student loan;
• no limitation period for the termination of the student loan;
• no enforced arbitration agreements or class action restrictions; and
• States should help student loan borrowers obtain additional student loan relief whenever possible.

3. Provide an automatic cancellation of the student loan when your college closes close

When a college closes without warning, it can be devastating for students trying to graduate. The Democrats want to:

• grant automatic student loan cancellation for federal student loans when a college closes;
• Termination of student loan without application;
• remove the restriction that does not allow cancellation of the student loan when moving to another university;
• automatic cancellation of student loan within 90 days of college closing;
• Cancellation of the student loan should be done quickly so that student loan borrowers can afford to go to their nearest college; and
• If a student leaves a school that is showing warning signs of closure, the Department of Education should set up a 180-day review period that would allow a student to cancel the student loan even if the student was not there at the time the school was closed.

4. Automatic termination of student loan for borrowers with disabilities

The Democrats want to increase the ability of student loan borrowers with disabilities to obtain student loan cancellation. For example, they suggest:

• Remove the requirement to submit a student loan cancellation request for federal student loan;
• Removal of the requirement for a “monitoring period” of potential revenue;
• The student loan should be dismissed within 90 days of notification by the US Department of Veterans Affairs or the US Social Security Agency;
• change the definition of “total and permanent disability” to determine whether there are other disabled but still incapacitated student loan borrowers and whether they should be entitled to have the student loan canceled;
• Determine if there are any borrowers with a disability who should qualify to cancel the student loan.

5. More student loan borrowers should qualify for student loan waivers

The signatories are calling for changes to student loan issuance for the Public Service Loan Program, including:

• Student loan prepayments and student loan lump sums should be considered qualifying student loan payments for student loan remission;
• the employment certificate and student loan waiver form should be combined into a single form;
• When student loan borrowers consolidate student loans, their student loan payments should not need to be reset;
• Postponement of economic hardship or postponement of military service should count towards qualifying student loan payments for student loan issuance;
• working for multiple employers for at least 30 hours per week in total should be eligible for student loan waiver;
• Create rules for employers who refuse to sign an employer certification form;
• Borrowers approved for qualifying student loan payments should not be penalized if the mistake was made by a student loan service provider or the US Department of Education;
• Establish a clear appeals process for all student loan borrowers who are denied student loans; and
• and introduce more data sharing between federal departments, such as the US Department of Defense.

Student Loans: Final Thoughts

Biden has canceled $ 3 billion in student loans since taking office as president. Initially, Biden canceled $ 1 billion in student loans for 72,000 borrowers. Second, Biden announced an additional $ 1.3 billion in student loans for 41,000 borrowers with total and permanent disabilities. Third, Biden provided student loan relief to 1.1 million student loan borrowers who defaulted on their FFELP loans. Fourth, Biden canceled $ 500 million in student loan debt for 18,000 student loan borrowers under the borrower defense policy to repay student loans. It is likely that Biden would support many of the suggestions outlined in this letter. Likewise, the Ministry of Education would sympathize with most of these proposals. The overarching theme is to encourage more student loan borrowers to receive student loan waivers and to remove unfair rules that are barriers to student loan cancellation. Many of these proposals are about cutting red tape and unfair practices that harm student loan borrowers. Some are quick fixes while others may take more time, e.g. To determine what a single income-driven repayment plan would look like. However, the Department of Education is likely to seriously consider all of these proposals and likely to implement many.

Even if one of these rules is adopted, you may not be eligible for student loan waiver. Because of this, it is important to understand all of your student loan repayment options. Here are some popular options to save money:

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