Getting ahead by seeking higher education has been the aspiration of many people in the American workforce, let alone college-bound high school graduates. This interest in pursuing a college education and the relative ease of getting a student loan has led to a skyrocketing debt crisis in the United States. We’re taking a closer look at student loans Biden is working on and what’s in store for America’s borrowers in the future.
The Federal Reserve estimates that Americans who have decided to advance their education by taking out a student loan racked up a staggering 1.7 trillion in the second quarter of 2021, a 3% increase from the second quarter of 2020. Further, going back to the second quarter of 2011, Americans owed $905 billion—that’s a 94% increase for those ten years.
This trend is not likely to decline because of the simplicity of taking out a student loan and the steady rise of tuition that colleges and universities impose on their students. These tuition increases have adversely affected the individual student loan borrower. In 2005, the average personal student debt level was $17,000, but at present, it has grown to $30,000. The federal government has attempted to subdue the problem, and recently, President Biden has joined in the chorus.
What Can President Biden Do?
Student loan forgiveness has been on President Biden‘s agenda since he took office earlier this year. Biden has been under increasing pressure from the progressives in his party to come up with a plan for across-the-board student loan forgiveness. However, any scheme for such a broad-brush approach would employ the maxim, “Easier said than done.” Outside of total student loan forgiveness, President Biden has been working on specific areas of student loan relief in addition to some already in place.
First, with the urging of President Biden, the U.S. Department of Education has extended the student loan payment suspension on student loan repayment, interest, and collections until January 31, 2022. It’s hoped that student loan defaults and late payments may fly under the radar by continuing this student loan pause.
The CARES Act passed by Congress and supported by President Biden was initiated to give the population general COVID relief and act as a life preserver for student loan borrowers. The CARES Act makes it possible for employers to help their employees who owe student loan debt by paying up to $5,250 toward their loans, and the employees would not owe U.S. federal income taxes on the payments. Despite President Biden‘s efforts, student loan forgiveness is minimal, and any total student loan Biden debt forgiveness is not visible on the horizon.
Debt repayment and the road ahead for borrowers
As the student loans Biden pause comes to a close at the end of January 2022, borrowers must be in the know of the road ahead regarding debt repayment. Here are some of the many (temporary) solutions suggested by the Biden administration to help ease borrowers back into the loan repayment cycle.
Student loans – Biden’s proposed solutions
- A brief 90-day grace period has been proposed during the first several months of repayment, which will see zero penalizations for debtors with late payments.
- Relaxed income-verification criteria for income-driven repayment plans have been proposed, including enabling borrowers to apply for refinancing over the phone with their loan servicer to reduce backlogs on refinancing applications.
- Borrowers who are in arrears on their federal student loans are likely to be immediately reinstated.
Nothing is set in stone, however. These proposed transitionary aids have not yet been formalized but are being discussed. Meanwhile, it is recommended that borrowers contact their loan servicer for further information on their expected monthly payments to begin in February of 2022. Borrowers whose financial circumstances have deteriorated since early 2020 may be eligible to request that their payments be taken forward under an income-driven repayment plan.
Student loan pause and updates
It has been a long time coming, but a highly redacted memo dealing with student loan debt cancellation has surfaced. Because of this, experts think that although though this document has little information, its presence shows to them that President Biden is legally able to cancel all debt but lacks the political will to do so. As a result of the memo’s recent discovery, supporters were reminded of what President Joe Biden had pledged during his campaign for the 2020 presidency.
Better management of student loans: Biden’s student debt crisis solution
President Biden‘s best intentions to move towards student loan forgiveness have been unsuccessful so far. Government intervention has helped to a certain extent, but it is not the total solution. The best remedy to the escalating student loans Biden crisis is education and better debt management.
If borrowers could access their student loan information at their fingertips, i.e., their smartphones with a user-friendly app, they would be well prepared to repay existing loans and make wiser decisions about future borrowing.
Spinwheel’s debt API makes student loan debt management easy and convenient
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