What’s Going on with Student Loan Forgiveness?

It’s no secret that the US has a full-blown student debt crisis on its hands. Even with millions of college students and graduates owing tens of thousands of dollars in student loans on average, young people still want to pursue higher education. With so many opportunities out there for people to study what they’re passionate about, whether it’s at a university or trade school, can you blame them? However, it can be discouraging to think about taking on massive amounts of debt just to get through college, which puts students in a difficult position when deciding what to do after high school.

The recent Supreme Court trial over whether the Biden Administration’s Student Debt Relief Plan is making headlines at a time when many young people are uncertain about what their educational future holds.

Since the beginning of the pandemic, we’ve seen loan repayment pauses, pause extensions, debt cancellation promises, and a number of other hiccups along the way. Student debt’s character arc is sending us all for a loop, but have no fear because we’re about to break it down so that you know what’s up.

Before we jump into the details of the Student Debt Relief Plan, here’s a timeline that sheds light on how we’ve reached the current moment:

The Supreme Court has yet to make a decision on the two cases against the Biden Administration’s student loan forgiveness program, and, likely, we won’t have an answer for months to come. In the meantime, the last repayment extension expires at the end of June 2023. Borrowers have 60 days after the June expiration before they must start paying on their loans.

The Basics: Who’s Eligible & How

Lawmakers and politicians have been alluding to student debt cancellation for years now, with the 2020 election offering the most detailed campaign promises. The Biden Administration launched its Student Debt Relief Plan last year. The plan includes the cancellation of up to $20,000 of student debt for individuals who make up to $125,000 per year. However, only borrowers who received Pell Grants will be able to claim the $20k, and the rest can claim $10k.

There is another way that borrowers can have a portion (or all) of their student debt cancelled. This is through the Public Service Loan Forgiveness (PSLF) program, which is for borrowers who have worked in public service for 10 years or more and have made 12 qualifying payments on their loans. Thankfully, a new student loan program will help public service loan forgiveness candidates become eligible for debt cancellation by changing some of the “qualifying payment” requirements.

What this means for new college students:

The cost of college tuition has increased 3,009% in the last 50 years. Yep, you read that right! There’s no wonder why so many young people are thinking twice about going to college. Although we’ve already come a long way and we’re so close to student loan forgiveness, there’s still so much uncertainty about the future of higher education costs.

Another uncomfortable truth about the cost of higher education is that there are still significant racial disparities that hit Black and Latinx students much harder than their white counterparts. Nearly half of Black borrowers and a third of Latinx borrowers default on their loans within 20 years, which the NAACP says is due to the provisions embedded in our education and economic systems which make it more difficult for students of color to thrive post-graduation.

There is hope for progress toward more affordable education, but it’s going to take a nationwide effort that doesn’t stop at just relieving student debt. Young people are demanding lawmakers lower the costs of higher education in order to address the student loan crisis at its source. Right now, only 24% of four-year colleges and universities are affordable for the average Pell Grant recipient student. That isn’t going to cut it if we want to see equitable educational opportunities.

What You Can Do

While policymakers and advocates are working hard to make affordable education available for all, there are a few things that you can do to avoid racking up student debt. Here are a few things you can do to set yourself for financial success:

• Fill out your FAFSA every year. That way, you’ll be automatically considered for federal grants (like the Pell Grant) and scholarships from your institution.
• Once you get your financial aid letter, make sure to read it carefully. The most important number on your letter is the “estimated net price of attendance,” which tells you how much you’ll owe each year after financial aid and scholarships.
• Consider going to community college first. Some cities like Boston are implementing tuition-free community college programs for all residents, potentially saving students thousands of dollars in tuition costs.
• Embrace your passions and check out trade schools. Plenty of great careers don’t require a four-year degree, and trade school can be an awesome route for many students. It’s also way more affordable and often has better job prospects upon graduation.
• Write to your representatives to urge them to implement tuition-free programs at 2-year community colleges.

We’re in uncertain times when it comes to higher education, but there’s a glimmer of hope that the advocacy of young people is starting to pay off (no pun intended)! The current Student Debt Relief Plan is the first of its kind and could create a snowball effect with other initiatives to make education more accessible.

Young people can plan for their financial future now by making sure they have what they need for the next step in their lives. If that is pursuing higher education, it’s crucial to stay informed about what is going on with student loan forgiveness and affordable education options. Setting ourselves up for success is so much more than choosing the right college major or trade profession; it’s about covering all of our financial bases, too.