President Joe Biden announced on Wednesday, August 24th that he will forgive $10,000 in federal student debt for most borrowers.
In his tweet, he says “In keeping with my campaign promise, my Administration is announcing a plan to give working and middle-class families breathing room as they prepare to resume federal student loan payments.”
Student Loan Forgiveness Biden Plan
Recall that following the Joe Biden Campaign on the issue of ambitious changes for higher education and relief for student loan borrowers. On his first day in office, he gave more time grace for the student loan payment.
On April 28, 2021, made open its plans for American families which among the plans are
- Proposes to Increase Pell Grants
- Provision for free community college
- Step up aid for schools that serve minorities
- proposal for additional types of loan forgiveness.
Generally speaking, paying back loans is believed to be quite more difficult than actually receiving them. Due to some uncontrollable circumstances sometimes, repayment of the loan would seem not possible. Even a student loan is no exception as a student can get a loan and even after graduating will be unable to pay it back. This is why there is a provision for Student loan Forgiveness.
A student loan is not too different from other types of loans as students are also to pay back the loan. There is more flexibility in the student loan which allows students to make the loan repayment conveniently so as not to affect their studies.
The main focus of the student loan forgiveness program is on students. it is an initiative to offset the loan taken by a student. There are conditions that students must meet to qualify a student for the forgiveness program. In this article, you will learn about student loan forgiveness, the procedures to follow to get this forgiveness, and many more.
What is a Student Loan?
According to Wikipedia, A student loan is a type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses. It may differ from other types of loans in the fact that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in school.
Looking at it from another angle, a student loan is a sum of money from private or public loan platforms to a student that needs cash in order to get an education, and the cash with interest the student will later payback on the basis of the student can cope with.
Why Get Student Loan?
There are so many reasons you should get a student loan, outlined here are just a few of them.
Flexibility
Getting a student loan is the best because the educational loan offers conditions and terms that the student borrower can cope with when compared to a student going for a non-education loan.
The federal and private lenders of student loans understand this and hence have made the loan as flexible as possible for the student. However, the federal government loan is more flexible.
Low-Interest Rates
Students searching for available loans should look out for federal loans first as they offer relatively low interest rates and this rate does not fluctuate over time. This gesture is to encourage students to apply for federal education loans.
Student Subsidized Loan
A subsidized student loan is an initiative given only by the government to students. The government pays all alluring interest on a loan as long as the student borrower is schooling in a recognized college. This is only for students who meet the financial need requirement by the FAFSA.
Builds Credit History
For many students, taking a student loan will be their first major financial transaction. Many would see getting a loan as bad but in a sense, it is actually teaching the student about financial responsibility to others and can also be a starting point for a student to build a good credit history.
Helps You Plan
A student who gets a loan would have made an adequate calculation on how to ensure the loan repayment. This can form a habit in the student and help the student also plan for the future.
What is Student Loan Forgiveness?
Student Loan Forgiveness is an initiative by the government to allow a student off the obligation of having to pay back a federal loan the student borrower is unable to pay. The government may forgive the loan in full or partially, depending on how qualified you are for the forgiveness program.
One of the best ways to avoid running into student loan debt is by applying for scholarships. To be able to secure a scholarship, you must be outstanding in academics- See our article on the best study hacks every student should adopt
How Student Loan Forgiveness Works
After taking a student loan, it sticks with you. Even when you file for bankruptcy, that obligation will remain with you depending on when you start getting paid again. This is precisely why the idea of the forgiveness program is so remarkable.
The Student Loan Forgiveness Program is run by the federal and state government that releases qualifying borrowers from outstanding balances. With the high cost of living and low wages, the forgiveness program is a dream for many student borrowers.
Aside from qualifying for loan forgiveness, you would have to make a little contribution to your loan which can be in the form of working in a certain type of job for years.
Although the forgiveness program is the most popular, there are other ways of extinguishing your debt. There is the option of “Discharge”. This is applicable when the borrower is dead or hit with a permanent disability. You can also apply for a Closed School Discharge in the case of the school you attended while running the debt close up or is no longer operational.
Biden Student Loan Interest
- Direct Subsidized and Direct Unsubsidized loans for undergraduates have a fixed interest rate of 3.73%.
- Pulse Loan(Direct) is a type of loan that is available to both Graduate and professional students and also has a fixed rate of 6.28%
- Lastly, is the Direct Unsubsidized Loans, Graduate can apply for this particular federal loan with a rate of %5.28.
How To Apply For Student Loan Forgiveness(Public Service Loan Forgiveness)
- Get a job with a qualifying employer
- Enroll in a qualifying repayment plan such as income-driven repayment
- Attain 120 qualifying payments
- Complete the certification of employment form for PSLF
- Submit your PSLF Application
When Will Student Loans Be Forgiven?
Under the present income-driven repayment plans, a typical federal student loan cancellation or forgiveness can be gotten after 20 years for Undergraduate student loans and up to 25 years for Graduate student loans.
Student Loan Forgiveness Covid
Due to the Covid outbreak, the government has set aside Emergency relief flexibility through at least Sept 30, 2021.
Some of the reliefs associated with student loans are:
- A 0% Interest rate
- Loan payment suspension
- Stopped collections on defaulted loans
$10,000 Student Loan Forgiveness Stimulus
In order to enhance economic recovery in the state, Biden proposed the $10,000 cancellation stimulus for student borrowers.
Biden Campaigned on a student loan forgiveness plan primarily targeted at student borrowers that render public service. Speaking about Biden’s plan, $10,000 of your loan debt for each year you perform eligible service, would be automatically canceled this would continue for up to five years.
Conclusion
Biden the US President supports the student loan forgiveness program wholly. His plans for the $10,000 student stimulus will no doubt encourage more students to take the federal student loan. However, students shouldn’t get student loans as a first resort when seeking funds for education.
References
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