Can federal student loans be forgiven after 10 or 25 years?
A announcement tuesday saw President Joe Biden’s first moves to tackle crippling student debt in the United States. These plans included a review of income-tested payments to facilitate student eligibility to an extent that their loans could be automatically canceled after 20 or 25 years.
The Department of Education must conduct a one-time review of the number of income-tested payments for all direct loans and federally administered Family Education Loan Program loans.
All months in which debtors have made payments will be considered for income-based repayment, regardless of payment plan and consolidation status. This type of repayment plan sets your monthly student loan amount at an amount that should be affordable based on your income and family size.
And above all, in these plans, any borrower who reaches the 20 or 25 year mark, depending on the plane in questionfor monthly payments after this revision will have their loans canceled automaticallysays the ministry.
“Student loans were never meant to be a life sentence, but it certainly is for borrowers excluded from the debt relief they are eligible for,” the US Secretary of State said. ‘Education, Miguel Cardona, in a press release.
So far the The Biden administration canceled $17 billion in student debt until now. It may seem like a lot of money, but when the the total of all student debt is $1.61 trillion. In some sort of context, that’s all zeros: $1,610,000,000,000. $17 billion is just over 1% of all student debt.
Is there a precedent for this style of loan forgiveness?
These ideas are in in line with how student debt is paid in the UK. Across the pond, students repay 9% of their earnings above a threshold of £27,295 a year. For example, someone earning £30,000 would pay 9% a year of £2,705, or £243.45. This is paid monthly, which means payments of just over £20 per month.
Unlike in the US, this is the default position for all UK students and does not need to be applied for.
Besides, any remaining debt is canceled by the bank 30 years after graduation, regardless of the amount, because the debt bears interest. Although there are fears that this means the government will foot the bill for students despite the privatization of universities, it does mean that students themselves are not afraid of becoming destitute or homeless.