Believe it or not – we are just a few weeks away from a new year and a new decade. Most people are looking forward to the change a new decade will bring. But the new year may bring more than just personal development and evolution; it could mean political and financial transformation too. Could 2020 offer student borrowers a fresh start and usher in a host of changes to student loans?
For the first time in a long time, student loan debt
is being discussed and treated as it is: a crisis. From Democratic Presidential candidates to Republicans, the issue is gaining ground as not only a hot-button issue but a solvable problem through bipartisan support.
As it stands now, here is what may be on the horizon for the student loan crisis:
Forecast from the U.S. Department of Education
We know how the current administration and U.S. Department of Education Secretary, Betsy DeVos, feel about student loan forgiveness. It’s simply not going to happen. However, there are plans and policies in the works to change the way students pay back their education loans.
reports that DeVos has proposed to make the $1.6 trillion student loan portfolio into its own agency, removing it from the Education Department. She told financial aid professionals that, “Congress never set up the U.S. Department of Education to be a bank.” This suggestion has left some financial aid experts wondering if the Trump administration is taking steps to privatize student loan debt.
Privatizing student loan debt would allow for the federal government to get paid on student loan debt a lot sooner. It would also reward borrowers who make monthly payments on time and have a good credit history versus those who don’t with better interest rates, according to Forbes
also states that the Department of Education is interested in income-sharing agreements versus the traditional student loan structure. Through income-sharing, students would not have to make payments on money owed until they found a job. From there, the federal government would receive a percentage of the borrower’s income for a specified amount of time.
Political Candidates Champion Student Loan Forgiveness
If you don’t know it already, there is a presidential election happening in 2020. The Democratic presidential candidate
roster is full of hopefuls, several of whom are touting student loan forgiveness as one of their main platform points.
Senator Bernie Sanders wants to eliminate ALL student loan debt, regardless of how much borrowers owe or make annually. He has also proposed free tuition.
Senator Elizabeth Warren has a more detailed plan, according to CNBC
. Anyone making under $100,000 would receive $50,000 towards paying off their student loans. For those making between $100,000 and $250,000, that $50,000 in debt relief drops by $1 for every $3 earned over $100,000. Finally, those making more than $250,000 would be ineligible for student loan forgiveness.
Finally, a Republican running for a Senate seat in Georgia has proposed a student loan forgiveness plan. A. Wayne Johnson, who was formerly the chief operating officer of the Office of Federal Student Aid under the Trump Administration, would move to forgive $50,000 in student loan debt for ALL borrowers. Johnson retired from his post just this October, saying that the student loan system in America is fundamentally broken, reports CNBC
Congress Gets a Head Start on Student Loan Changes
In October, the House Committee of Education and Labor proposed a reauthorization of the Higher Education Act that would lower the cost of college
and help to alleviate the burden of student loan debt. A number of issues actually have bipartisan support, meaning real change could be coming to student loans!
reports that there is a movement by both Republicans and Democrats to reduce the number of repayment plans, which currently stands at 14, to two. One repayment plan would allow borrowers to span their monthly payments across 10 years. The other plan would cap monthly payments at a percentage of the borrowers income, allowing them to pay the debt off in 20+ years.
Both Republicans and Democrats are in favor of eliminating student loan origination fees, which can actually be a few hundred dollars depending on the amount borrowed. Eliminating these fees would help borrowers save more – or apply more to the actual amount owed.
House Democrats have also proposed to allow for student loans to be refinanced. Currently, education loans can only be refinanced with a private lender. If federal education loans are eligible for refinance, borrowers can refinance them at the current interest rates, which would save money in the long run.
Finally, there is some bipartisan support – albeit small – for student loans to be eliminated through bankruptcy. Currently, they cannot be eradicated through filing for bankruptcy, which means there is no way for borrowers to get out of their student loan payments – no matter how desperate their situation.
Hope for Student Loan Borrowers
Only time will tell if these proposed student loan changes come to fruition; however, student loan borrowers have more reason to hope than ever. With a Presidential Election on the horizon and bipartisan support for certain measures, real change may be here sooner than we think.
As always, Fastweb aims to keep students and parents well-informed of student loan changes. As policies fall into place, we’ll have all of the details right here.