Here’s what the Republicans mean for your student loans. (Hint: It’s not what you might think.)
Here’s what you need to know.
Student loan forgiveness has primarily been associated with progressive Democrats pushing for systemic change in higher education. When you think of large-scale student loan cancellation, you think of prominent advocates such as Senator Elizabeth Warren (D-MA), Senate Majority Leader Chuck Schumer (D-NY), Representative Alexandria Ocasio-Cortez (D-NY) and Representative Ayanna Presley (D-Master). However, you rarely read about Republicans and student loan forgiveness. The common perception is that Democrats care about education while Republicans don’t. Or that Democrats want to help student borrowers while Republicans don’t. No matter which political party you support, it’s important that you understand how Republicans handle student loans and student loan forgiveness. Here’s what the Republicans mean for your student loans. (You might be surprised to know this):
1. Republican-backed student loan forgiveness
Student loan forgiveness received by more than 40 million student loan borrowers today Approved by the Republican Senate. In March 2020, Congress passed the Sponsorship Act, which was a $2.2 trillion stimulus bill that included a significant student loan forgiveness. It was Senator Mitch McConnell (Democrat from Kentucky) who led the US Senate at the time, not Schumer. This student loan forgiveness includes temporary student loan forbearance for federal student loans, a 0% interest rate on student loans, and no student loan collection in the event of a default. (Is the student debt cancelled next?). In a rare show of bipartisan support, Republicans and Democrats have banded together in efforts to provide standard student loan forgiveness to federal student loan borrowers. President Donald Trump signed the Cares Act into law, and both Trump and Biden have extended this student loan forgiveness five times. Collectively, the temporary student loan incurrence would provide federal student loan borrowers with more than $120 billion in student loan interest over two years.
2. Interest-free student loans proposed by Republicans
Last year, Senator Marco Rubio (R-Fla) reintroduced legislation — the Opportunity for Americans Now (LOAN) Act — that would eliminate federal student loan interest rates. Imagine the 0% temporary interest rates on federal student loans that exist now, except that this will continue forever. If Congress passes the LOAN Act, student borrowers can save big and pay off student loans faster. (Student loan forgiveness may be a reason Democrats lose in the midterm elections.) Instead of 0% interest rates on federal student loans, the legislation would include a one-time, non-composite establishment fee, or financing fee, that student loan borrowers would pay over the life of the student loan. LOAN will also automatically enroll student loan borrowers in the Income-Based Repayment Plan (IBR), during which they pay 10% of adjusted gross income in excess of 150% of the federal poverty line, excluding times of unexpected financial hardship. The one-time fee may vary depending on the type of student loan and your income. So far, however, Congress has not passed the loan law. (Those who will not receive student loan forgiveness.)
3. Pay off student loans with a 401k
Senator Rand Paul (R-Kentucky) proposed the Aid (Higher Education Loan Payment and Enhanced Retirement) Act so you could pay off student loans in the amount of 401K. Under the HELPER Act, you can withdraw up to $5,250 of your 401(k) or IRA annually to pay for college or to pay off student loan debt. First, you can make these withdrawals tax-free and without penalties. Second, HELPER will enable you to pay tuition fees for a dependent or spouse. Third, employer-sponsored student loan and tuition plans will be tax-deductible up to $5,250 annually. Fourth, there will be no maximum interest deduction for a student loan. Fifth, the legislation could encourage more student loan borrowers to save money in a 401K retirement plan or student loan repayment retirement plan. Although Congress did not pass the HELPER Act, it could revolutionize the future of student loan repayment and make it easier for student borrowers to borrow. (Student loan borrowers will get $15 billion from student loan cancellation.)
Student Loans: Final Thoughts
The Republicans did not support widespread student loan forgiveness for all student loan borrowers. While Democrats are leading the way in widespread student loan cancellation, Republicans have helped pass student loan forgiveness and have proposed several ways to reshape student loans and provide more financial benefits to student borrowers. The future of student loans and student loan forgiveness will be affected by both Republicans and Democrats working together to achieve a bipartisan solution. There are good intentions and ideas on both sides, but stalemate can be avoided when practical solutions are adopted that appeal to both parties. Biden said he will sign legislation on student loan forgiveness, student loan forgiveness, student loan forgiveness and student loan forgiveness once Congress passes the legislation. The clock is ticking.
With student loan forgiveness ending soon, make sure you’re ready to repay your student loan. Learn all your options. Here are some popular ways to pay off student loans faster:
Student loans: related reading
Those who will not get student loan forgiveness
Is canceling student debt next?
Student loan borrowers will get $15 billion from student loan cancellation
How Your Student Loans Can Qualify For $1.7 Billion Student Loan Forgiveness