Student loans have become a hot topic during the 2020 presidential election. As student loan balances continue to rise — graduates have an average debt of $29,650 — ideas have been circulating among politicians about how to address the issue.
It’s also likely that it will become more and more pressing over the coming years and elections as more young adults gain the right to vote and have to deal with the crippling effects of student loan debt.
So how might the results of the 2020 presidential election impact the student loan issue? Can we expect student loan forgiveness in 2021 or beyond from President-Elect Joe Biden? Here’s what you need to know.
Donald Trump’s impact on student loans during presidency
President Trump supported multiple approaches to address the student loan debt crisis during his presidency. The most recent was his decision to sign the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which temporarily paused student loan payments for select federal student loan borrowers.
In August, before the period set forth by the CARES Act expired, the president directed Education Secretary Betsy DeVos to continue to suspend payments, waive interest and stop collections for eligible borrowers through the end of 2020.
Another stance Donald Trump had taken on student loan debt was to repeal the Public Service Loan Forgiveness program (PSLF). The president believes it unfairly benefits public service employees and wished to replace the program with a blanket 15-year loan forgiveness program for all federal loan borrowers. He also supported doing away with subsidized loans and limiting Direct PLUS Loans for parents and graduate students.
Finally, President Trump had previously proposed consolidating the income-driven repayment plan from four options down to one. He planned to reduce monthly payments to 12.5% of discretionary income, shorten the repayment period to 15 years on undergraduate loans, and extend the repayment period to 30 years on graduate loans.
President-Elect Joe Biden’s plan for student loans
Former Vice President and now President-Elect Joe Biden hasn’t been nearly as progressive as his early Democratic contenders on the topic of student loans, but Joe Biden on student loan debt has taken an arguably more aggressive approach to tackling student debt when compared with President Trump.
Biden’s main focus has been on expanding student loan forgiveness options and also making college free for many college students.
That includes offering forgiveness on all undergraduate federal student loan debt for borrowers earning less than $125,000 per year, though it’s unclear exactly how one would qualify. The candidate has also talked about reducing income-driven monthly payments to 5% of discretionary income for borrowers who earn over $25,000 and down to zero for people making under that amount.
Other ideas include making PSLF more accessible, giving eligible borrowers $10,000 per year for up to five years, and offering federal loan forgiveness after 20 years with no threat of income tax on the discharged balance.
The presidential election’s impact on student loans
It’s important to keep in mind that proposals and promises made during a presidential campaign are always accompanied by an asterisk. That is to say that the President of the United States doesn’t have the ultimate authority to create or alter student loan policy — that process includes Congress.
As a result, Joe Biden may have a tough time getting some of his more progressive ideas through what many predict will be a Republican-controlled Senate.
So will we see student loan forgiveness in 2021? It’s unlikely we’ll see sweeping changes so quickly, but there are some scenarios where it could occur, even if only on a small level.
How to save on student loans now
Whether or not we see student loan forgiveness in 2021 (or other initiatives), it’s important for student loan borrowers to take steps now to address their debt. After all, it could still take years for legislators and President-Elect Joe Biden to agree on and implement changes to the current federal student loan system.
What’s most important is that you consider the options you can take. One of those is student loan refinancing. The process allows you to replace one or more existing student loans with a new one through a private lender.
The refinancing process can have several benefits, including the chance to score a lower interest rate than what you’re paying right now and payment flexibility as you can choose a shorter or longer repayment term than your current one. Currently, student loan refinancing interest rates are at historic lows.
You’ll also have the option to shop around and choose your lender based on a variety of factors and features. With the federal student loan program, you don’t get to choose your servicer unless you consolidate your loans, but that process can slightly increase your interest rate, making it more costly.
That said, if you have federal student loans, refinancing them with a private lender will cause you to lose access to current and future student loan forgiveness programs. Also, most private lenders don’t offer income-driven repayment plans.
As a result, it’s important to consider every aspect of your situation and your options before you decide. If you want to take a look at student loan refinance rates, you can compare quotes from multiple lenders in one placing using Purefy’s Compare Rates tool.
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The bottom line
Student loans have become an important issue in politics, and that likely won’t change anytime soon. While Joe Biden has many ideas on how to address the crisis, it may still take some time before student loan borrowers start seeing changes.
In the meantime, if you’re hoping to pay down your student loan debt faster and save money, consider student loan refinancing as an option. There’s no guarantee it will be the best path forward for you, but taking the time to do your due diligence can help you make the best decision for your situation.