Will your student loans change in 2021?
Here’s what you need to know.
Student loans could change this year on several fronts. The election of Joe Biden, the Covid-19 pandemic, the makeup of Congress and the state of the economy could each influence the direction of student loans in 2021. With multiple proposals for your student loans seeping in in Congress, it is possible that your financial life could be impacted this year.
Here are 5 things about your student loans that could change:
Cancel student loans
One of the hottest topics in student loans is student loan cancellation. Will your student loans be canceled? Over the past year, there have been several proposals to cancel student loans. For example, in the Heroes Act stimulus package, House Democrats proposed to write off $ 10,000 in student loan debt for financially troubled borrowers. However, as Congress passed a $ 900 billion stimulus package that included $ 600 stimulus checks, Congress cut student loans from the stimulus package. In the US Senate, Senator Elizabeth Warren (D-MA) and Senatorial Minority Leader Chuck Schumer (D-NY) want cancel $ 50,000 in student loans for every student borrower who earns less than $ 125,000 per year. While Warren and Schumer want President-elect Biden to cancel student loans by executive order, Biden said he was unlikely to cancel student loans through executive action. Instead, Biden wants Congress cancel $ 10,000 in student loans immediately. If Republicans control the US Senate, Congress is less likely to write off student loan debt.
Suspend student loan payments
Student loan payments for federal student loans are suspended until January 31, 2021. On February 1, 2021, in the absence of any extension, your regular student loan payments will resume. The CARES Act – the $ 2.2 trillion stimulus package that Congress passed in March – offered many benefits to student loan borrowers. For example, for federal student loans, Congress suspended payments, stopped the accumulation of interest, and halted the collection of student loan debts for delinquent student loans. It is possible that Congress or the President will extend the forbearance period for federal student loans beyond January 31. Any decision to extend student loan relief would be based on several factors, including the pace of the economic recovery, the unemployment rate, the trajectory of the Covid. -19 pandemic and bipartite support level.
Cancel student loans in bankruptcy
Can You Write Off Student Loan Debt In Bankruptcy? Traditionally, it has been difficult, but not impossible, to pay off your student loans in the event of bankruptcy. For some borrowers, it is possible to get student loan forgiveness through the bankruptcy process depending on financial hardship. Biden applied for student loans be discharged in the event of bankruptcy. There is also bipartisan support in Congress to enable borrowers to pay off their student loans in the event of bankruptcy. As an alternative to large-scale student loan debt cancellation, Congress could amend the bankruptcy code to allow borrowers to release their student loans in the event of bankruptcy.
Your employer pays student loans
Your employer can help you pay off your student loans. Under the Cares Act, there is a tax incentive for employers to help their employees pay off their student loans. Employers can make tax-free payments up to a maximum of $ 5,250 per employee. Federal student loans and private student loans are eligible, provided principal or interest payments on a “qualified student loan.” You and your employer can benefit from it. For example, you can save on federal income taxes, while you and your employer save on federal payroll taxes on eligible student loan payments. Employers can choose between tuition assistance and this student loan repayment, but not both. This employer student loan relief was scheduled to expire on December 31, 2020. However, in the new stimulus plan, Congress extended this education benefit until December 31, 2025.
“Free College” was a hot topic of the presidential campaign and was led by Warren and Senator Bernie Sanders (I-VT). The philosophy of the tuition-free college is to make higher education more affordable and reduce the amount of student debt. Biden said the government should forgive all federal student debt related to two and four year public college and university undergraduate tuition fees for borrowers earning less than $ 125,000 per year. Don’t expect a “free college” in 2021. While Congress may address the cost of higher education and student loans, Congress is unlikely to implement a tuition-free plan now. The proposal requires partnerships with states, which would also have the financial responsibility to subsidize tuition fees. With many state governments facing budget cuts due to the impact of the Covid-19 pandemic, Congress is less likely to address this short-term policy proposal.
How to pay off student loans faster
What’s the best way to pay off student loans faster? In an election year with a public health crisis, high unemployment and economic hardship, anything can happen with your student loans. In the meantime, make sure you don’t hope or wait for student loan relief that might not come. Take the time to create a student debt repayment plan so that you can pay off your student loans faster. Start with these three options, all free: