Fox News recently had an article that caught my attention. See College students shocked to hear ‘Biden’ student loan plan is really Trump’s: ‘I hate him, but that’s a start’.
The premise of the article seems to be some college students thought deferring student loan payments and suspending payroll taxes for three months was a good thing.
One student told Eduardo Neret that deferring student loan payments “sounds like a good idea,” while another called it “amazing.”
And there is the underlying problem.
The issue is not of a preference to Biden or Trump but to a total lack of understanding about how those policies will negatively impact their personal finances.
I can only hope that some students traipsing back from the beach actually were aware that the payroll tax holiday is smoke and mirrors and suspending only federal student loan payments temporarily is not loan forgiveness.
Just to give you the facts, here is the proposed Biden plan for bankruptcy reform:
- Make it easier for people being crushed by debt to obtain relief through bankruptcy.
- Expand people’s rights to take care of themselves and their children while they are in the bankruptcy process.
- End the absurd rules that make it nearly impossible to discharge student loan debt in bankruptcy.
- Let more people protect their homes and cars in bankruptcy so they can start from a firm foundation when they start to pick up the pieces and rebuild their financial lives.
- Help address shameful racial and gender disparities that plague our bankruptcy system.
- Close loopholes that allow the wealthy and corporate creditors to abuse the bankruptcy system at the expense of everyone else.
When it comes to education and student loans, this is the vision:
- Double the maximum value of Pell grants, significantly increasing the number of middle-class Americans who can participate in the program and increasing the grant value for individuals already eligible for Pell.
- More than halve payments on undergraduate federal student loans so individuals will pay 5% of their discretionary income (income minus taxes and essential spending like housing and food) over $25,000 towards their loans. After 20 years, the remainder of the loans for people who have responsibly made payments through the program will be 100% forgiven. Individuals with new and existing loans will be automatically enrolled in the income-based repayment program, with the opportunity to opt out if they wish. Individuals making $25,000 or less per year will not owe any payments on their undergraduate federal student loans and also won’t accrue any interest on those loans.
- Make loan forgiveness work for public servants by creating a new, simple program that offers $10,000 of undergraduate or graduate student debt relief for every year of national or community service, up to five years, and by fixing the existing Public Service Loan Forgiveness program.
Additionally, the hope is to offer two years of community college or other high-quality training program without debt for any hard-working individual looking to learn and improve their skills. Make four-year public colleges and universities tuition-free for all students whose family incomes are below $125,000.
The proposals on student loan forgiveness are a start but we still need to fix the problem that the debt is not forgiven tax-free.