Here’s what the Republicans mean for your student loans. (Hint: it’s not what you think).
Here’s what you need to know.
Cancellation of student loans has primarily been associated with progressive Democrats pushing for systemic change in higher education. When you think of large-scale student loan forgiveness, you think of high-profile advocates like Sen. Elizabeth Warren (D-MA), Senate Majority Leader Chuck Schumer (D-NY), Rep. Alexandria Ocasio-Cortez (D-NY) and Rep. Ayanna Pressley (D-MA). However, you rarely read about Republicans and student loan forgiveness. The common perception is that Democrats care about education and Republicans don’t. Or that Democrats want to help student borrowers and Republicans don’t. Regardless of which political party you support, it’s important to understand how Republicans approach student loans and student loan forgiveness. Here’s what the Republicans mean for your student loans. (You might be surprised to learn this):
1. Republican-backed student loan relief
The student loan relief now available to over 40 million student borrowers was passed by a Republican Senate. In March 2020, Congress passed the Cares Act, which was a $2.2 trillion stimulus bill, which included major student loan relief. It was Sen. Mitch McConnell (D-KY) who then led the US Senate, not Schumer. This student loan relief included a temporary student loan forbearance for federal student loans, a 0% interest rate on student loans, and no collection of student loans in default. (Is student debt forgiveness next?). In a rare show of bipartisan support, Republicans and Democrats came together to join forces to deliver record student loan relief to federal borrowers. President Donald Trump signed the Cares Act into law, and Trump and Biden extended that student loan relief five times. Collectively, the temporary student loan forbearance will have saved federal borrowers more than $120 billion in student loan interest over two years.
2. Interest-free student loans offered by Republicans
Last year, Sen. Marco Rubio (R-FL) reintroduced legislation — the Leverage Opportunities for Americans Now (LOAN) Act — that would eliminate interest rates on federal student loans. Imagine the temporary 0% interest rates on federal student loans that exist now, except it would continue permanently. If Congress passed the Loans Act, student borrowers could save a lot of money and pay off their student loans faster. (The student loan forgiveness could be the reason the Democrats lose the midterm elections). Rather than 0% interest rates on federal student loans, the legislation would include a one-time, non-compound origination fee, or finance charge, that student borrowers will pay over the term of their student loan. The loan law would also automatically enroll student borrowers in an income-based repayment (IBR) plan, during which they would pay 10% of their adjusted gross income above 150% of the federal poverty level, except in cases of unforeseen financial difficulties. . One-time fees vary depending on the type of student loan and your income. To date, however, Congress has not passed the Loans Act. (Here’s Who Won’t Get Student Loan Forgiveness).
3. Pay off student loans with your 401k
Sen. Rand Paul (R-KY) proposed the HELPER (Higher Education Loan Payment and Enhanced Retirement) Act so you can pay student loans with a 401K. Under the HELPER Act, you can withdraw up to $5,250 from your 401(k) or IRA each year to pay for your education or to pay off your student loan debt. First, you could make these withdrawals tax-free and without penalty. Second, the HELPER Act would allow you to pay tuition for a dependent or spouse. Third, employer-sponsored student loan and tuition plans would become tax-exempt for up to $5,250 per year. Fourth, there would be no cap on the deduction of interest on student loans. Fifth, the legislation could encourage more student borrowers to save money in a 401k or retirement plan to pay off student loans. Although Congress did not pass the HELPER Act, it could revolutionize the future of student loan repayment and make it easier for student borrowers. (Student borrowers will get $15 billion in student loan forgiveness).
Student loans: final thoughts
Republicans did not support large-scale student loan cancellation for all student borrowers. While Democrats are leading the charge on large-scale student loan forgiveness, Republicans have helped pass student loan relief and have proposed several ways to reshape student loans and provide more financial aid for students. student borrowers. The future of student loans and student loan forgiveness will be impacted by Republicans and Democrats working together to reach a bipartisan solution. There are good intentions and good ideas on both sides, but deadlock can be avoided when practical solutions that please both sides are adopted. Biden said he would sign legislation on student loans, student loan forgiveness, student loan relief and student loan forgiveness as soon as Congress passes the legislation. The clock is turning.
With temporary student loan relief ending soon, make sure you’re ready to start paying student loans again. Learn all your options. Here are some popular ways to pay off student loans faster: