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Credello Answers Student Loan Forgiveness Questions

According to Investopedia, the average student loan debt in America has risen to $38,792. While public colleges are still reasonably priced at roughly $10,000 a year,

 According to Investopedia, the average student loan debt in America has risen to $38,792. While public colleges are still reasonably priced at roughly $10,000 a year, tuition at private universities is creeping up close to the $40,000 a year level. Meanwhile, on Capitol Hill, the debate is still raging about student loan debt forgiveness.   


Will President Biden forgive student loan debt? He’s already cancelled $15 billion in federal student loans, but his Department of Education is in the news this week for trying to block one case of student loan forgiveness being offered in a Delaware court bankruptcy ruling. Ryan Wolfson, a 35-year-old grad student with epilepsy, was awarded forgiveness for a financial hardship.  


The DOE reversed its position, which was to block the ruling, after a deluge of public outcry. Joe Biden made a promise to eliminate student loan debt when he ran for office in 2020, so his education department opposing any action that facilitates that is just bad optics.  


Navient Agrees to $1.7 Billion in Student Loan Debt Forgiveness 


Navient, which is one of the nation’s largest student loan servicers, recently lost a class-action lawsuit that was filed for predatory and deceptive lending tactics in 30 states and the District of Columbia. The settlement is $1.7 billion and will award over 400,000 students $260 back on federal student loans and full forgiveness on private student loans. 


Student loan debt forgiveness on private loans is extremely rare, almost unheard of. When the President talks about loan forgiveness, he’s referring to federal student loans. The government has no power to unilaterally forgive private loans. This is an important point for students who have questions about loan forgiveness. That FAFSA form is key to wiping out your debt. 


Congress is Unwilling to Move on Student Loan Forgiveness 


Forgiving student loan debt for existing borrowers will open a can of worms that Congress doesn’t want to deal with. If they write legislation on it, graduates who’ve already paid off their loans will want compensation. Despite that, progressives are still pushing hard for it. Conservatives would like to see legislation that brings tuition rates down. 


The president has the power to eliminate student loan debt by executive order, but that still leaves him open to the “what about us?” argument from previous debtors. Instead of a blanket federal student loan debt forgiveness action, he’s opted to do it in smaller doses, thus the $15 billion that has already been forgiven. It’s an election year, though, so expect more on this. 


Forbearance is Not Student Loan Debt Forgiveness


The federal government implemented a student loan debt forbearance program at the beginning of 2020 to help combat the economic effects of the pandemic. Forbearance is not forgiveness. The program, which froze payments and interest rates, is set to expire at the end of April. Student loan debt payments and interest accumulation will resume in May.  


Progressives in Congress wrote a letter to President Biden stating that ending the forbearance program without some student loan debt forgiveness could be “disastrous.” They’re asking the president to grant $50,000 worth of forgiveness to each borrower. They’re also asking for clarification on the DOE’s ruling on what Biden’s powers are in this area.  


As it stands right now, payments on federal student loan debt will resume in May without debt forgiveness. Graduates working in the public sector or as teachers may get some forgiveness after several years working in the field. Those struggling financially could qualify for income driven payment plans. As for the rest of us, we’re stuck with the bill for now.  

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