The Biden loan forgiveness plan is the latest in a long line of government programs designed to help Americans with their student loans. But what exactly is it, and how does it compare to other plans that are already out there?
This blog post will break down the Biden loan forgiveness program and tell you everything you need to know about it. We will also compare it to alternative options so that you can make an informed decision about whether or not this plan is right for you. Continue reading to learn more about Biden loan forgiveness!
Loan Forgiveness: What Is It?
Loan forgiveness is a process by which the government or your lender cancels all or part of your student loan balance. This can happen if you work in a public service job, make regular payments for a certain number of years, or meet other criteria set forth by the government or your lender.
Loan forgiveness can be a reasonable way to eliminate your student loan debt, but it is essential to remember that you may have to pay taxes on the forgiven amount.
There are different types of loan forgiveness, including, but not limited to:
-Public Service Loan Forgiveness: This program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments while working full-time for a qualifying employer.
-Teacher Loan Forgiveness: You may qualify for forgiveness of up to $17,500 on your Direct Subsidized and Unsubsidized Loans and Direct PLUS Loans. This can happen if you teach full-time for five complete and consecutive academic years in a low-income elementary school, secondary school, or educational service agency.
-Perkins Loan Cancellation and Discharge: You may have all or part of your Perkins Loan canceled if you serve in certain public service jobs or meet other conditions.
-Income-Driven Repayment Plan Forgiveness: You may have the remaining balance of your loan forgiven if you repay your loan under an income-driven repayment plan and meet other requirements.
How the Biden Loan Forgiveness Plan Is Different
Biden’s loan forgiveness plan is unique in a few ways:
First, it can forgive up to $10,000 for every year you are in public service. According to the plan, anyone who works for the government or a non-profit organization is considered to be in public service. This differs from other plans that only forgive loans for certain types of jobs, like teaching or working in a low-income school.
Second, it allows you to cancel your student loan debt if you are unemployed or underemployed. You are considered underemployed if you are working but not making as much money as you need to support yourself. This is a big deal because many people who are struggling to find a job or make ends meet are also struggling to make their student loan payments.
Finally, the Biden loan forgiveness eliminates the need for borrowers to make 120 monthly payments before their loans are forgiven. This means that you could have your loans forgiven after just five years of making payments, rather than the 20-25 years it would take under other plans.
Pros of the Biden Student Loan Forgiveness Plan
There are a few key advantages to the Biden loan forgiveness plan:
-It forgives a more significant amount of debt than other plans. For example, if you have $50,000 in student loan debt and work in public service for ten years, the government will forgive $100,000 of your debt. This is a big deal because it can help borrowers with a lot of debt get out from under it more quickly.
-The plan is more forgiving if you are unemployed. If you are unemployed or underemployed, you will still have your loans forgiven as long as you make 10% of your discretionary income each year. This is different from other plans, which require you to make payments even if you can’t find a job.
-It does not require borrowers to make 120 monthly payments before their loans are forgiven. Although the number of monthly payments for Biden loan forgiveness is still being determined, it will likely be lower than the 120 payments required by other plans.
-It eliminates the need for borrowers to be employed or have a certain income level to qualify for forgiveness. This means that regardless of income level, anyone who works in public service can have their loans forgiven.
Cons of the Biden Student Loan Forgiveness Plan
There are also a few drawbacks to the Biden loan forgiveness plan:
-It is only available to borrowers with federal student loans; private loans are not eligible for forgiveness under this plan.
-The forgiven amount may be taxable in certain states. This is because some states could require the forgiveness to be counted as income, which would then be taxed along with the rest of your income.
-There is no guarantee that your loans will be forgiven under this plan because the plan is still being developed and has yet to be implemented. The final version of the plan may be different from what is currently proposed.
-If the US spends this money on forgiving student loan debt, it won’t be spent on other important social programs such as healthcare, housing, or education. This is a valid concern because the US government has limited money to spend each year.
-It is possible that the plan will result in a tax increase for high-income earners. This is because the plan proposes to pay for some of the forgiven debt by raising taxes on people who make more than $250,000 per year and families who make more than $400,000 per year.
-It is possible that the Biden loan forgiveness plan will increase inflation because the plan proposes to forgive a lot of debt, which would increase the money supply. When there is more money in circulation, it can lead to inflation.
Biden Loan Forgiveness Eligibility
To be eligible for the Biden loan forgiveness plan, you must have federal student loans. Private loans, however, do not qualify for forgiveness under this plan.
You must also be employed or have a job offer in a public service job. This includes jobs with the government, a non-profit organization, or a private company that provides public services.
Finally, you must make 10% of your discretionary income yearly towards your student loans. Discretionary income is the amount of money you have left after paying for your basic living expenses.
How to Apply for Biden's Student Loan Forgiveness
If you think you are eligible for the Biden loan forgiveness plan, you should contact your loan servicer to learn more about how to apply. You will need to provide documentation of your employment or unemployment and your income. You can also visit studentaid.gov for more information (see disclaimer at the end of the blog post).
Alternative Options to the Biden Loan Forgiveness
If you are not eligible for the Biden loan forgiveness plan or would just rather choose an alternative option, other paths are still available to help you with your student loan debt. For example, you may be able to consolidate your loans or refinance your loans to get a lower interest rate.
You can also look into income-driven repayment plans, which can lower your monthly payment based on your income. You could start investing in a student loan repayment plan, which can help you pay off your loans faster, or you can work with a financial planner to develop a custom plan to pay off your student loans.
Reach Out to Iron Point Financial Today
If you need help making a plan to pay off your student loans, reach out to Iron Point Financial. We can help you consolidate your loans, refinance your loans, and enroll you in an income-driven repayment plan. We also offer other services, such as credit counseling and financial planning.
We serve the Grove City, Greenville, Erie, Cranberry Township, and Boardman, OH areas.
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