For those out there with student loans, you're probably excited to see the push to cancel some or all of your debt. Even presidential candidate Joe Biden has come out in favor of some student loan forgiveness. And while it can be uplifting to hear that you could get some much needed help with your student loan burdens, it may be too early to celebrate. Not everyone favors cancelling student debt and it seems to be more of a partisan issue.
What's the issue with student loan forgiveness?
Why wouldn't everyone be a fan of eliminating this huge debt burden? Proponents argue that cancelling student debt can help stimulate the economy and increase growth. It also gives many people peace of mind from having the burden of loans hanging over them. In a recession, doing so can lead to job growth and increased spending, which could help the economy recover.
Not everyone agrees with them though. Some people think that it's unfair to forgive the loans of some and leave out those that already paid off their loans in a timely manner. Opponents also believe that student loans are the cost of the service of college, a choice that the student took, and they should live up to their obligations. But the biggest reason that people oppose student loan forgiveness is that it would cost too much. There's currently $1.6 trillion of debt across 45 million borrowers. Cancelling even $10,000 per borrower still carries a bill of $450 Billion, not counting those with less than $10,000 in debt.
Will your loans be forgiven?
Currently there are a couple of ways to get student loan forgiveness depending on your situation, but only if your loans are public. If you work for a non-profit or in the public sector, you may qualify for public student loan forgiveness (PSLF). For those who work in such a sector for 10 years and making "qualifying" payments, you can have all your debt forgiven.
There's also another way to get student loan forgiveness if you are on an income-driven repayment (IDR) plan. Through these plans, you pay anywhere from 10-20% of your income. After making those payments for 10 to 20 years, if you have a remaining balance it will be forgiven. Be careful though, because while your loans are forgiven, the amount forgiven will be counted as income and you will have to pay taxes on the amount forgiven.
If you don't qualify for these plans, there may be hope for you. Due to the coronavirus pandemic, the government has temporarily paused interest on loans and even discussed forgiving some loans. Former VP Biden has also come out in favor of some form of student loan forgiveness, so it has become quite a popular issue. Of course, relief from the government could take time and would not excuse any current obligations.
Other ways to help your student loan burden
One way you can lower the burden of loans is by refinancing them. This can help you lower your payments by lowering your interest rate or spreading out payments over a longer period of time. If you plan on refinance, you should shop around with different providers to see which one can offer you the best rate and allow you to pay back the loan on your terms.
Or, if you want to get rid of your loans completely, you could refinance with a Defynance income share agreement (ISA). Through an ISA, you only pay back a small percent of your income for a period of time. This means that your payment will change with income, so that it's always affordable. Even better, if you ever make under $25,000 a year for any reason, your payments will pause until you start earning above that. This allows you more freedom to live your life.
